Mental Health and Learning Disability: Health Inequalities

Baroness Murphy: asked Her Majesty's Government:
	What progress they have made in developing a national monitoring system of critical health outcomes for people with a mental health condition or learning disability following the reports by the Disability Rights Commission and Mencap.

Lord Hunt of Kings Heath: My Lords, these reports highlighted a completely unacceptable situation. A number of actions are in hand to address the range of issues raised in both reports. On 31 May, we published a new strategy for public health intelligence, emphasising the need for information that monitors inequalities in health, including those caused by disability.

Baroness Murphy: My Lords, I thank the Minister for that reply and am grateful for the Government's efforts in this respect, but does he not agree that some of the facts are quite shocking? Mental health patients and those with learning disabilities have more than twice the average rate of heart attacks and strokes under the age of 55. Only 20 per cent of women with learning disabilities are offered breast screening compared with 80 per cent of women generally. People with schizophrenia have twice the average rate of bowel cancer. Does that not suggest that primary care trusts have no mechanisms for monitoring these inequalities or any real processes in play for monitoring the outcomes of inequalities in a whole range of groups of vulnerable people?

Lord Hunt of Kings Heath: My Lords, the noble Baroness is right to draw our attention to the seriousness of the reports and, indeed, to the poor health outcomes for many people with mental health conditions or learning disabilities. The public health information to which I referred will enable PCTs to have a much better idea of the problem and, therefore, to take action. Commissioning advice for mental health patients was given last year to the health service, and more advice on this very issue is being prepared on those with learning disabilities.

Baroness Wilkins: My Lords, given that the disability equality duty is one of the most powerful mechanisms that the Government have put in place to promote equality of disabled people, are the Government satisfied with the response by PCTs to fulfil this duty? How many PCTs have produced the required disability equality scheme, and are the Government satisfied with the quality of those schemes?

Lord Hunt of Kings Heath: My Lords, that goes rather wider. I expect that PCTs will have done what is required under the law, but we will be monitoring the situation. I pay tribute to the DRC for its extraordinarily valuable work. We have already responded to this specific DRC report once, and we are due to go back to the commission in the autumn with an account of our actions. I can assure the noble Baroness that we will be working closely with it on this matter.

Baroness Neuberger: My Lords, the Government's White Paper Our Health, Our Care, Our Say: ANew Direction for Community Services acknowledged that, historically, the NHS has not served people with learning disabilities well. However, all it actually says is that it will explore way s of delivering on an earlier commitment to introduce regular health checks for that group. It does not give a time-scale. Can the Minister give us a time-scale today?

Lord Hunt of Kings Heath: My Lords, health checks are very important for people with learning disabilities. I assure the noble Baroness that we are working very hard on this. I hope very much that the commissioning guidance that will go out to primary care trusts fairly shortly will cover this issue.

Baroness Masham of Ilton: My Lords, is the Minister aware of the very serious problem of people with a dual diagnosis of mental illness and drug and alcohol addiction? Will he assure us that they will not fall through the net of different agencies?

Lord Hunt of Kings Heath: My Lords, I am very much aware of that. It is why we want agencies to work very closely together. The noble Baroness identifies an issue known as diagnostic overshadowing. The DRC report makes it clear that often the problem is that health professionals do not recognise that people with mental health issues or learning disabilities may have physical health issues as well. The outcome of the work that we are doing with the DRC is to get this matter much more widely recognised by health professionals.

Earl Howe: My Lords, following the question of the noble Baroness, Lady Neuberger, does the Minister share my concern that only 20 per cent of women with a learning disability are screened for cervical and breast cancer compared with 80 per cent of the female population as a whole? How do the Government intend to ensure that these services better reach women with learning disabilities?

Lord Hunt of Kings Heath: My Lords, we are very concerned about that. The noble Earl might also have mentioned that the DRC report referred to bowel cancer, which seems to have a much higher incidence in people with schizophrenia. We are looking at all those issues to ensure that the appropriate programmes are in place. As regards bowel cancer, we are setting up a bowel screening advisory committee which we hope will consider the screening of high-risk groups such as those with schizophrenia.

Baroness Howarth of Breckland: My Lords, housing, education and other services directly affect the health of people with learning disabilities and mental health conditions. Therefore, what are the Government doing to ensure that they have joined-up government in response to this report?

Lord Hunt of Kings Heath: My Lords, the noble Baroness raises a very important matter. We encourage the closest working between local agencies. I commend to her local area agreements as a way of tackling this matter. The local government Bill, which will shortly come to this House, very much strengthens the requirement for partnership between the health service, local government and other statutory agencies.

Lord Low of Dalston: My Lords, also following the question on health checks, given that annual health checks for people with learning disabilities are not part of the GP contract, will the Minister encourage PCTs to use enhanced service agreements to commission annual health checks for people with a learning disability, as some health boards are already doing in Wales?

Lord Hunt of Kings Heath: My Lords, I shall be glad to consider that interesting suggestion. As I said, we very much want to see GPs undertake these health checks. We are preparing commissioning advice for primary care trusts. We shall want to address the matter in future contractual negotiations with GPs.

NHS: Denial of Treatment

Lord Naseby: asked Her Majesty's Government:
	Whether they will review the denial of some National Health Service treatment to certain obese people and smokers, given that treatment is provided to drug addicts, alcoholics and those suffering from anorexia.

Lord Hunt of Kings Heath: My Lords, it is for doctors, in consultation with patients and their families, to determine the care that is clinically appropriate for each patient, based on an individual assessment of need and of the risks and benefits of all available treatment types. This assessment will take into account lifestyle choices that may affect the efficacy of treatment.

Lord Naseby: My Lords, that is a marginally helpful Answer, but by what right does the noble Lord, as a senior Health Minister, decide that the 25 per cent of adults who smoke and the millions of people who are technically obese—all of whom have paid their taxes and national insurance—are to be denied National Health Service surgery, as has been stated by Leicester City West PCT, and are to be taken off the waiting list, as they are by Norwich PCT? Other PCTs are also taking discriminatory action. In the light of that evidence, will the Minister exercise his authority under the NHS Acts and instruct all PCTs to stop such discrimination forthwith?

Lord Hunt of Kings Heath: My Lords, the noble Lord asked me by what right I do this. I do not believe that I have exercised any such decision in relation to his question. The proposal of the Leicester PCT to which he referred came from the professional executive group of clinicians. It has not been agreed by the PCT and will be subject to public consultation. My understanding is that there is no proposal for a blanket ban on surgery. What is happening is that patients due for non-urgent surgery will be offered pre-operation smoking cessation advice. The operation would be deferred while smokers were given an opportunity to access that advice. The reason for that is the balance of risk and advantage. Stopping smoking would lead to those patients experiencing a reduction in heart and lung complications, faster wound healing, faster bone fusion times and a reduction in the length of stay in hospitals. At the end of the day, it is an issue of clinical judgment based on the balance of risks and benefits; it is not a matter for Ministers.

Lord Tebbit: My Lords, would it be right if the same criteria were to be applied to those whose sexual habits made them vulnerable to particularly unpleasant sexually transmitted diseases? Would they be expected to give up those habits to obtain treatment?

Lord Hunt of Kings Heath: Of course not, my Lords. The noble Lord is quite ridiculous in asking that question. In the public interest, at the very least, sexual disease should be treated. That is a completely different issue. The issue that we are considering is advice from doctors to a public health authority that has not yet been agreed. It states that for smokers there are different balances of risk in certain operations and that offering smoking cessation services to those people before they have an operation would be in their best interests as well as anyone else's. I am content to abide by the judgment of clinicians, whose number one consideration is the interest of the individual patient.

Earl Howe: My Lords, is the noble Lord not describing a blanket policy, rather than a patient-specific decision?

Lord Hunt of Kings Heath: My Lords, it is not a policy; this is a recommendation from an advisory committee of clinicians. My understanding is that the recommendation has not been formally considered by the PCT and that it will be subject to public consultation. I have received an assurance that it is not a blanket ban on surgery, but it is not unreasonable for a PCT to develop a general policy for smokers, provided that, in the end, it comes down to an individual clinical decision. The clear evidence seems to be that it is better for a patient to stop smoking before they have an operation.

Lord Addington: My Lords, is the Minister saying that if someone indulges in an activity that is damaging their health and may make the treatment less effective, there is a possibility that they will not be treated, but only in those circumstances and on an individual basis? Is that the full extent of the guidance?

Lord Hunt of Kings Heath: My Lords, that is certainly my understanding. The noble Lord put the point very well. However, this is not an agreed policy by the PCT. I refer him to evidence from the London Health Observatory, which showed that if smokers stop smoking before surgery, there are short-term benefits: a reduction in lung and heart complications, faster wound healing, faster bone fusion time and a reduced length of stay in hospital. It does not seem unreasonable for the PCT concerned to ensure that clinicians, using their clinical judgment, are able to offer smoking cessation services to those patients. In the end, it has to be an individual clinical judgment.

Lord Stoddart of Swindon: My Lords, I hear what the Minister said and I understand it but surely he realises that there is an impression that there is a witch-hunt against smokers in particular. There are all sorts of activities that, if stopped, would save the National Health Service money and ensure that people got better treatment. He understands—I hope that the medical profession and the PCTs do, too—that smokers pay a huge premium through cigarette tax for the treatment that they receive. They are entitled to at least the same treatment as others who pay tax.

Lord Hunt of Kings Heath: My Lords, as an only recently reformed smoker, I fully accept what the noble Lord said. This is not health fascism; this is not about discrimination against smokers. This is about what is in the best interests of the patient in terms of clinical judgment; that is how it should remain. It is important that any policy that is agreed by a PCT in this area should be subject to full public consultation. I have no doubt that it is important that PCTs listen to what noble Lords say but, at the end of the day, I am satisfied that these discussions involve issues relating to what is clinically best for individual patients.

Taxation: Corporate Tax

Lord Roberts of Conwy: asked Her Majesty's Government:
	Whether the expected reduction in the growth of public expenditure following the spending review will provide scope to reduce the corporate tax burden and improve British competitiveness.

Lord Davies of Oldham: My Lords, in the Budget 2007, the Government set the overall spending limits for the 2007 Comprehensive Spending Review period to ensure that it meets their strict fiscal rules while allowing public spending to increase by an average of 2 per cent a year in real terms. The Budget also announced a reduction in the main rate of corporation tax from 30 per cent to 28 per cent, making it the lowest rate among the G7 countries.

Lord Roberts of Conwy: My Lords, I am grateful to the noble Lord for that reply. However, is he aware of the mounting concern within the CBI and other business organisations about the corporate tax burden and its relentless cumulative rise from £60 billion in 1997 to its current level and its likely rise to £95 billion by 2010? Is not the result of this going to be an exodus of some of our major companies to other countries with less burdensome tax regimes? Most of our trading partners have got less burdensome regimes than we have, with the possible exception of France. If it is not happening now, that exodus will surely happen in the near future.

Lord Davies of Oldham: My Lords, there was some business anxiety before the Budget but cutting corporation tax, as I indicated to the House, from 30 to 28 per cent, which made it the lowest corporation tax rate in the G7—the rate is well below that of the EU 15 and the OECD averages—reassures business that we will continue to be fair with regard to our taxation and spending policies. It is just not the case that investment is fleeing elsewhere; far from it. Britain is showing a very real increase in investment in this country. The number of head offices being established in London far outscores the number in all the other countries and capitals put together. I dispute the position that the noble Lord outlined in his question.

Lord Forsyth of Drumlean: My Lords, the Minister says that Britain is doing well, but did he see the extraordinary press conference at which the Reverend Ian Paisley and Mr Martin McGuinness were united in their call for Northern Ireland to enjoy the same corporate tax rates as southern Ireland, which has seen revenues go through the roof and its economy expand rapidly as a result of reducing corporation tax?

Lord Davies of Oldham: My Lords, we all realise why at least one of the parties mentioned by the noble Lord would look towards the Republic as an exemplar, but we cannot compare an economy as large as ours—the fourth largest in the world—with that of the Republic of Ireland. The Republic obviously gets huge returns from the European Community because of its very high level of agricultural production, and that factor cannot apply to a more advanced economy such as that of the United Kingdom.

Lord Stoddart of Swindon: My Lords, does the noble Lord agree that the fixing of tax bases should be the job of the Chancellor of the Exchequer and Parliament? If he does agree, will he also confirm that the Government are against a harmonised corporate tax base in the European Union and that they will continue to resist it and, if necessary, veto it?

Lord Davies of Oldham: My Lords, the noble Lord is right: taxation policies are very important for the United Kingdom Parliament and the United Kingdom Government. I can confirm to the noble Lord that, as he partially conceded, we have opposed harmonisation and will continue to do so.

Lord Newby: My Lords, does the Minister agree that corporation tax rates, like income tax rates, have a totemic value that is almost more important than the level of the tax? Therefore, does he not see the advantage in continuing the process that the Chancellor began this year by replacing capital allowances with tax-deductible depreciation, which would allow him to reduce corporation tax further?

Lord Davies of Oldham: My Lords, that is an interesting proposal and the Chancellor has looked at it very carefully. The noble Lord is right in one respect: the corporation tax rate may become somewhat totemic with regard to the status of economies. However, many other factors beyond corporation tax dictate the level of investment in the economy, and the present level of investment in the United Kingdom testifies to the success of the Government's current strategy.

Baroness Noakes: My Lords, since 1997, Britain has dropped from fourth to 10th in the World Economic Forum's competitiveness league table. If tax is not causing the problem, what is?

Lord Davies of Oldham: My Lords, a number of factors relate to that position, but the noble Baroness will recognise that in fact our economy is showing strong growth with increased investment. The economy is looking sound in those terms. The figures that she gave with regard to our economic competitiveness were accurate, but she will concede that, taken over a period, the overall strategy is serving this country well.

Lord Tomlinson: My Lords—

Viscount Montgomery of Alamein: My Lords—

Noble Lords: Cross Benches!

Lord Tomlinson: My Lords, this side has not had a question.

Lord Rooker: My Lords, there is not time for both noble Lords to ask a question, but four Cross-Benchers have been up so far and only one noble Lord from the Labour Benches.
	My Lords, did my noble friend see, with the same degree of pleasure that I had, the YouGov poll in the Sunday Telegraph at the weekend, which gave a comparative evaluation of the economic competence of my right honourable friend the Chancellor of the Exchequer and his opposite number? Returning to the original Question, does my noble friend share my concern that at successive general elections we have been told about the number of people who would leave the country if a Labour Government were elected, but so far we have remained disappointed that they are still with us?

Lord Davies of Oldham: My Lords, the whole House will have seen that important poll over the weekend and greeted it with varying degrees of delight. However, I am able to confirm to my noble friend that I rejoice in that figure. The poll reflects a growing understanding of confidence in the Labour Government.

Viscount Montgomery of Alamein: My Lords, I am the first Cross-Bencher to speak on this item, contrary to what the noble Lord, Lord Rooker, said. Has the Chancellor, who is a Scot, remembered the old adage of Adam Smith that less tax equals more revenue?

Lord Davies of Oldham: My Lords, I should have thought that the Chancellor had proved that point over the past decade, as international opinion regards Britain as one of the more lightly taxed business economies.

Iraq and Iran: Stability Talks

Baroness Williams of Crosby: asked Her Majesty's Government:
	What was the outcome of the recent discussions with Iran on stabilising Iraq.

Baroness Royall of Blaisdon: My Lords, we welcome the fact that the US and Iranian ambassadors to Iraq and Iraqi government representatives met on 28 May in Baghdad. Her Majesty's Government were not represented at the meeting, so it would not be appropriate for us to characterise the outcomes. However, we have impressed on Iran bilaterally that a stable and secure Iraq is in the interests of all its neighbours, and that Iran should desist from activities which undermine that objective.

Baroness Williams of Crosby: My Lords, I thank the Minister for her reply. I simply remind the House that that meeting, which took place during the parliamentary Recess, was the first direct, open meeting held between the two countries at a senior level for 48 years. Importantly, they both agreed that they wanted to see a stable, secure and democratic Iraq. First, do Her Majesty's Government welcome the suggestion put forward by the Iranian side that there should be a continuation of that trialogue between Iraq, Iran and the United States over the forthcoming months and years? Secondly, does the Minister agree that it is important for both the United States and Iran to desist from activities that upset and lead to distrust on the part of the other country?

Baroness Royall of Blaisdon: My Lords, on the first question, the organisation of future meetings is, of course, for the parties concerned. However, Her Majesty's Government would welcome any future contact between the three parties, because we believe that it is important to engage in dialogue and that it is the best way of bringing about a secure situation in Iraq. On the second question, we want all countries, be they neighbours or those active in Iraq, to desist from any actions that destabilise that country or the region itself.

Lord Corbett of Castle Vale: My Lords, would not one of the best contributions to stabilising Iraq be to persuade the Iranians to stop paying 32,000 Iraqi citizens to do their bidding and to stop arming, training and financing insurgent and terrorist groups in Iraq?

Baroness Royall of Blaisdon: My Lords, my noble friend is quite right. On every occasion when we meet the Iranians, at every level, we ask them to desist from those actions. The best way to bring about a secure Iraq is to stop outsiders arming insurgents inside Iraq. We have to bring about a secure Iraq to ensure the stability of the region as a whole.

Lord Dykes: My Lords, the Minister sounds rather complacent. In view of the fact that America's military blunders in Iraq are getting worse and worse, in an already severely damaged country—with or without Iranian involvement—what is the next step for the Americans if the surge does not work?

Baroness Royall of Blaisdon: My Lords, I am not complacent; neither are the Government complacent at all where Iraq is concerned. We are working in Iraq to bring about a secure situation. What the Americans do in Iraq is, of course, of extreme importance, but that is the policy of the American Government and not the policy of this Government. We work together; we are coalition partners; however, we both have separate policies that interject.

Lord Howell of Guildford: My Lords, it would be good if this dialogue becomes a trialogue and continues, as the noble Baroness, Lady Williams of Crosby, has suggested, on the simple principle that to jaw-jaw is very much better than to war-war. Has the Minister had reports—obviously second-hand—about any discussion of Iran's nuclear ambitions? Is that linked with what, according to the Americans, Iran can or cannot do to reduce the tensions in Iraq? These two matters seem tangled up in American minds. Does she have any light to throw on that division of views?

Baroness Royall of Blaisdon: My Lords, we understand that the sole subject discussed at the meeting was the security of Iraq.

Lord Hylton: My Lords, is it the Government's policy to involve Syria in the stabilisation of Iraq? Can the Minister give any good news on improvements regarding Iraqi refugees in Syria and Jordan?

Baroness Royall of Blaisdon: My Lords, we support strong bilateral relations between Iraq and all its neighbours, including Syria and Iran. We welcome the recent neighbourhood conference which took place in Iraq in May. We hope that that will provide a platform to build on. I do not have the figures or information to hand about refugees in Syria, but I will write to the noble Lord.

Lord Anderson of Swansea: My Lords, clearly Iran is the regional superpower after the invasion and can use that power for good or for ill. Is it the Government's view that Iran, although there may be short-term temptations, is prepared to see that in the longer term it has an interest in the unity and stability of Iraq? Is it prepared to disaggregate Iraq from the other pressing problems—nuclear, Lebanon and so on—which affect it?

Baroness Royall of Blaisdon: My Lords, when we have discussions with Iran, obviously Her Majesty's Government at every level discusses all the issues which are pertinent to our relationship. These include Iraq, stability of the region and the nuclear issue. I assure my noble friend that we now speak to Iran quite regularly on Iraq.

Standing Orders (Public Business)

Baroness Amos: My Lords, I beg to move the Motion standing in my name on the Order Paper.
	Moved, that the Standing Orders relating to public business be amended as follows:
	(Questions for written answer)
	At end leave out "it may be given on any sitting day including that on which the Question is handed in".—(Baroness Amos.)

On Question, Motion agreed to.

Delegated Powers and Regulatory Reform Committee

Lord Brabazon of Tara: My Lords, I beg to move the Motion standing in my name on the Order Paper.
	Moved, That Lord Boyd of Duncansby be appointed a member of the Select Committee in the place of Lord Acton, resigned.—(The Chairman of Committees.)

On Question, Motion agreed to.

Pensions Bill

Lord McKenzie of Luton: My Lords, I beg to move that the House do now again resolve itself into Committee on this Bill.

Moved accordingly, and, on Question, Motion agreed to.
	House in Committee accordingly.
	[The LORD SPEAKER in the Chair.]
	[Amendment No. 48 not moved.]
	Clause 15 [Abolition of contracting-out for defined contribution pension schemes]:

Lord McKenzie of Luton: moved Amendment No. 49:
	Clause 15, page 19, line 1, leave out subsection (2)

Lord McKenzie of Luton: I shall also speak to the other amendments in the group. The amendments deal in particular with the treatment of the protected rights that members of contracted-out defined contribution schemes would have built up before contracting out on a defined contribution basis is abolished.
	I should explain a little about contracting out and protected rights. We were going to hear about contracting out in defined benefit schemes. Clause 15, Schedule 4 and these amendments deal with contracting out in defined contribution schemes, also known as money purchase schemes. Contracting out allows people to opt out of the state second pension by saving in a private pension scheme instead. Those who contract out forego some or all of their rights in the state second pension scheme. In return, they receive a rebate of national insurance contributions.
	In a defined contribution scheme, the national insurance rebate for contracting out, together with any associated tax relief, is invested in the person's pension scheme. That amount and its investment return are known as protected rights, and certain rules apply to those rights. They can be invested only in certain specified products. They may be transferred only to schemes that are contracting out, and annuities purchased with the protected rights must be calculated on a unisex basis. In particular, protected rights must provide for a survivor benefit if a scheme member is married or a civil partner at the time that an annuity is purchased.
	The Government acknowledge that, because the protected rights rules do not apply to any other rights held in a person's pension pot, the separate tracking of protected rights can complicate scheme administration and restrict flexibility for members. In order to simplify matters, we want to remove as many of those rules as possible, but we need carefully to consider the potential impact, especially on women, of removing the rule requiring a provision of a survivor benefit. That is because such removal could result in a survivor not receiving a pension from either the private pension scheme or the state second pension.
	In another place, the Bill was amended to insert a power to abolish or vary by regulations the rules applying to protected rights. The Government's intention was to take decisions on the use of that power in the light of the findings of the joint DWP/Treasury review of the open market option for annuities. One of the fundamental aims of that review is to ensure that people make informed choices about their annuity type and fully understand the consequences of their choice. In particular, it will consider the provision of joint life annuities.
	However, the Delegated Powers and Regulatory Reform Committee considered that changes to the rules on protected rights were too significant for a regulation-making power. It recommended that the changes be included in a future Bill, once decisions on the policy had been made. I have written to the committee accepting its recommendation. As a result, the amendments will remove the delegated power in line with the committee's recommendation. At the same time, the amendments remove all the rules that apply to protected rights, except for the provisions concerning survivors. The consequence of those changes is that protected rights will be treated in the same way as non-protected rights when being invested or transferred.
	Furthermore, at the point of annuitisation, members will no longer be required to purchase a unisex annuity. Unisex annuities are not required, or indeed generally provided, for non-protected rights. That change means that in future those who are not married or in a civil partnership will be able to buy just one annuity with their protected and non-protected rights. That will bring about some simplification for schemes and members. We acknowledge, however, that further simplification could be achieved by removing the rules on survivor benefits.
	I am sure that the Committee will agree that it is right to consider the question of survivor benefits in greater depth and that a decision on protected rights and survivors must await the outcome of the review of the working of the open market option for annuities. When that decision is taken, any changes to legislation will be placed in a future Bill to allow a full discussion.
	Contracting out is a complex matter which has given rise to many legislative provisions with multiple cross-references. In order to achieve the abolition of contracting out on a defined contribution basis, a number of amendments and repeals are being made to existing legislation by virtue of Clause 15 and Schedule 4. The minor and technical changes in this group of amendments allow cross-references to the provisions that are being amended or repealed to be corrected in other legislative provisions.
	Amendment No. 54, in the name of the noble Lord, Lord Skelmersdale, seeks to remove all the protected rights rules, although I understand that he may not move it. As I have said, our amendments abolish most of the rules, but they will preserve the rule that requires the purchase of a joint-life annuity if the scheme member is married or in a civil partnership at the point of annuitisation. The Government acknowledge that the removal of this remaining rule would further simplify the schemes for members, but we believe that such an important matter must be looked at in greater depth before that decision is taken. I beg to move.

Lord Skelmersdale: I tabled Amendment No. 54 in the spirit of inquiry to elicit the sort of information that the Minister has just given. I accept that, at this stage in the proceedings, it goes a trifle too far, but something of the remainder of that paragraph in Schedule 4 may well be found in the next pensions Bill. Anyone would think that there had been some collusion between the Minister and me, as we are in perfect agreement on this point. I assure the Committee that there has been no such collusion. When the time comes, I shall not move Amendment No. 54.

Lord Oakeshott of Seagrove Bay: Far be it from me to join this genuine or implied collusion. I am sure there is none, but I will leave it to the Minister and the noble Lord.

On Question, amendment agreed to.

Lord McKenzie of Luton: moved Amendments Nos. 50 to 52:
	Clause 15, page 19, leave out lines 10 to 15
	Clause 15, page 19, line 21, at end insert "(but any power to make regulations conferred by those amendments may be exercised at any time so as to make regulations having effect as from the abolition date)"
	Clause 15, page 19, line 26, leave out from "Schedule 4" to end of line 27
	On Question, amendments agreed to.
	Clause 15, as amended, agreed to.
	Schedule 4 [Abolition of contracting-out for defined contribution pension schemes]:

Lord McKenzie of Luton: moved Amendment No. 53:
	Schedule 4, page 46, line 8, at end insert—
	"In section 20 (transfer of accrued rights) in subsection (3) (regulations may provide for certain provisions to have effect subject to modifications) for "sections 26 to 33" substitute "sections 25A to 33".
	On Question, amendment agreed to.
	[Amendment No. 54 not moved.]

Lord McKenzie of Luton: moved Amendments Nos. 55 to 61:
	Schedule 4, page 46, line 16, leave out "or"
	Schedule 4, page 46, line 18, at end insert ", or
	(c) a registered pension scheme under section 153 of the Finance Act 2004—(i) which is not a scheme falling within paragraph (a) or (b), and(ii) to which the rights of a person who was at any time a member of a scheme mentioned in either of those paragraphs have been transferred."
	Schedule 4, page 46, line 29, at end insert—
	" After section 27 insert—
	"27A Requirements in relation to giving effect to protected rights
	(1) The rules of the scheme must provide that if, in the case of a member who is married or who has a civil partner, effect is to be given to the protected rights of the member by—
	(a) the provision by the scheme of a pension, or(b) the purchase by the scheme of an annuity,the requirement set out in subsection (2) must be satisfied in relation to the pension or annuity.
	(2) The requirement is that, in a case where—
	(a) the member dies while the pension or annuity is payable to him or her, and(b) the member is survived by a widow, widower or surviving civil partner ("the survivor"),the pension or annuity is payable to the survivor in prescribed circumstances and for the prescribed period at an annual rate which at any given time is one-half of the rate at which it would have been payable to the member if the member had been living at that time.
	(3) The rules of the scheme must provide that, if effect is to be given to a member's protected rights by the provision of a lump sum, the prescribed conditions must be satisfied.
	(4) The rules of the scheme must provide that, if—
	(a) a member has died without effect being given to his or her protected rights, and(b) the member is survived by a widow, widower or surviving civil partner,effect is to be given to the protected rights in such manner as may be prescribed."
	Omit sections 28 to 29 (ways of giving effect to protected rights etc.).
	For section 32A substitute—
	"32A Discharge of protected rights on winding up: insurance policies
	(1) Where an occupational pension scheme is being wound up, effect may not be given to the protected rights of a member of the scheme by taking out a policy of insurance (or a number of such policies) under which the member is the beneficiary unless the policy (or each such policy) satisfies the requirement in subsection (2).
	(2) The requirement is that the policy of insurance makes such provision in relation to giving effect to the protected rights of the beneficiary as a scheme to which section 25A applies is required to make under or by virtue of section 27A in relation to giving effect to the protected rights of a member of the scheme.""
	Schedule 4, page 52, line 11, at end insert—
	"In section 2 of that Act (registration of stakeholder pension schemes) in subsection (2) (when Authority to register schemes) in paragraph (b)(i) for "to (10)" substitute "to (9)"."
	Schedule 4, page 52, line 14, at end insert—
	"In Schedule 5 to that Act (pension credits: mode of discharge) in paragraph 7(6) (disqualification as destination for pension credit) in the definition of "contracted-out rights"—
	(a) in paragraph (a), omit "or (3)";(b) after paragraph (a) insert—"(ab) an occupational pension scheme constituting a money purchase contracted-out scheme for the purposes of that Act, or";(c) in paragraph (b), for "which is" substitute "constituting"."
	Schedule 4, page 53, line 23, at end insert—
	"In section 20 (transfer of accrued rights) in subsection (3) (regulations may provide for certain provisions to have effect subject to modifications) omit "and 43 to 45".
	Omit section 31 (investment and resources of scheme)."
	Schedule 4, page 54, leave out lines 35 to 38 and insert—
	"(a) omit the definition of "appropriate flat-rate percentage";(b) for the definition of "the percentage for contributing earners" substitute—""the percentage for contributing earners" means 3 per cent;"; (c) for the definition of "the percentage for non-contributing earners" substitute—""the percentage for non-contributing earners" means 4.8 per cent.""
	On Question, amendments agreed to.
	Schedule 4, as amended, agreed to.
	Clause 16 [Dispute resolution arrangements]:

Lord McKenzie of Luton: moved Amendment No. 62:
	Clause 16, page 20, leave out lines 26 to 33 and insert—
	""(3) The procedure—
	(a) must include provision requiring an application to which subsection (3A) applies to be made by the end of such reasonable period as is specified;(b) may include provision about the time limits for making such other applications for the resolution of pension disputes as are specified.
	(3A) This subsection applies to—
	(a) any application by a person with an interest in a scheme as mentioned in section 50A(1)(e), and(b) any application by a person with an interest in a scheme as mentioned in section 50A(1)(f) who is claiming to be such a person as is mentioned in section 50A(1)(e).""

Lord McKenzie of Luton: Although this is a minor and technical amendment to the clause on dispute resolution arrangements, it is a necessary change because, without it, the time limits for making an application will not work as intended. The requirement for occupational pension schemes to have dispute resolution arrangements has been with us since 1997. From the start, there has always been a cut-off date for applications from people who no longer have an interest in the scheme. This is simply to protect schemes from complaints many years after the event, when there may be little prospect of a satisfactory investigation or resolution. Up to now, these time limits have always been prescribed in regulations but, in keeping with the wider policy on time limits, we want to replace the fixed six-month period currently in place with reference to a reasonable period. What constitutes a reasonable period is open to interpretation. The Pensions Regulator is required under Section 90(2)(a) of the Pensions Act 2004 to provide guidance in the form of a code of practice. In the dispute resolution arrangements, the requirement for an application to be made within a reasonable time is intended to apply in two situations: first, for applications where the person has ceased to be a person with an interest in the scheme; and, secondly, where a person is claiming to be a person with an interest in the scheme, but that interest is in the past. Unfortunately, the clause as drafted goes beyond what was intended in the second situation.
	In the case of an application from someone claiming to have an interest in the scheme, new subsection (3)(b) to Section 50B, as inserted by Clause 16 as it stands, requires the arrangements to apply a time limit for every case, including those where the application is from a person claiming to have a current interest in the scheme. This amendment ensures that the requirement for a time limit for applications applies in those cases only where the claimed interest is in the past. Under the clause as it stands, it is difficult to establish when a reasonable period would start where the application is, for example, from someone claiming to be a current member. The amendment is necessary to ensure that the time limits work as intended. I am sorry if this sounds a little convoluted: in this case, the effect of the amendment is far simpler than the explanation. I beg to move.

Lord Skelmersdale: This may be a rather nitpicking point, but in the amendment subsection (3)(a) of new Section 50B says "must" and (b) says "may". In the Bill, it is the other way around. This amendment is a technical replacement for the words in the Bill, so why have we had this—I think the word is probably—transvergence?

Noble Lords: Transposition.

Lord Skelmersdale: I am told that the word is transposition.

Lord McKenzie of Luton: The noble Lord is as eagle-eyed as ever. I may just have to ponder a little to give him a full explanation on why those words have been transferred or transmogriphied or whatever, but I will revert to him.

On Question, amendment agreed to.
	Clause 16, as amended, agreed to.
	Clause 17 agreed to.
	Schedule 5 agreed to.
	Clause 18 agreed to.
	[Amendments Nos. 63 and 64 not moved.]

Lord Hunt of Wirral: moved Amendment No. 65:
	After Clause 18, insert the following new Clause—
	"Minimum retirement income
	(1) The amount of the minimum retirement income in respect of each tax year shall be set by the Chancellor of the Exchequer by order at the level of the standard minimum guarantee prescribed under section 2 of the State Pension Credit Act 2002 (c. 16).
	(2) Before making an order under subsection (1), the Chancellor of the Exchequer shall consult such persons as he considers appropriate.
	(3) An order under this section (other than the order that applies to the first tax year during which this section is in force) must be made on or before 31st January of the tax year before the tax year to which the order applies."

Lord Hunt of Wirral: First, I declare my interest as a partner in the national, commercial law firm of Beachcroft LLP, as deputy president of the Chartered Insurance Institute and the other entries in the register, including my honorary fellowship of the Institute of Actuaries. We now move on to discuss a battery of amendments that touch on some profound and serious issues of principle. This debate has been well rehearsed in this House, in another place and beyond these precincts for many years. I am obliged to my honourable friends in the other place, including Nigel Waterson and Sir Malcolm Rifkind, for their hard work in helping to draft the amendments to which I now speak, including Amendment No. 65.
	To summarise the thinking that lies behind these amendments, I concede immediately that annuitisation has its merits. It offers a simple and secure way of ensuring that a pensioner will be able to maintain a certain level of income throughout his or her retirement. There is nothing in these amendments that will stop pensioners looking for this simple and secure way of funding their retirement by continuing to buy an annuity at any point throughout their retirement. It is also palpably true that the guarantee of a certain minimum income, no matter how long one might endure, is to the general benefit of the taxpayer at large.
	Annuities can of course prevent pensioners spending their pension pots too quickly and being forced to fall back on benefits such as pension credit. Again, I should like to point out that these amendments do nothing to weaken that guarantee. Instead, they give pensioners a choice. Pensioners would be able to exercise choice over their pension funds with the single limitation that they must not recklessly spend them so that they end up becoming a burden to the long-suffering taxpayer.
	The largest amendment in the group, Amendment No. 66, allows for the establishment of a minimum retirement fund. In essence, this would be a savings scheme from which pensioners could draw down their retirement savings at a time of their choosing, as subsection (2) of the proposed new section makes clear. Subsections (3) and (4) of the new section ensure that a pensioner cannot draw out so much that the provider will no longer be able to guarantee a certain level of income for the rest of his or her life—a level that Amendment No. 65 establishes is set by the Secretary of State. The final two amendments are consequential.
	The Parliamentary Under-Secretary of State for Work and Pensions in another place suggested that there was no real demand for this sort of scheme, but that is certainly not the case in other countries. In Canada, a similar scheme is chosen by around 50 per cent of pensioners; indeed, it is the most popular savings vehicle in the country, and I reckon that the popularity of a scheme is not a bad criterion by which to judge it. On that basis, surely the fact that not one other country in the developed world has a compulsory annuitisation scheme akin to ours tells its own story.
	Ministers have already allowed those who find compulsory annuitisation unattractive a way out. The Christian Brethren must have set a record by now for the most references in parliamentary debates per capita. This tiny but admirable band of around 738 souls at the last count has a principled objection to the pooling of the risk of mortality, which is essentially how annuities work. Quite understandably, Ministers hold the opinion that religious convictions which do no harm to the general public or to the taxpayer should be permitted. Consequently, they have allowed members to take out alternatively secured pensions. What I find quite inexplicable is why the Government will not extend the same privilege to those who object to compulsory annuities on non-religious grounds. I hope that the Minister will be able to explain why a secular desire to avoid suffering the unnecessary costs and inflexibility of an annuity is considered less legitimate than the desire to avoid breaking a religious stricture.
	Members on these Benches believe that a person's pension pot is his or her own property. Tax incentives for pension schemes are there to encourage people to save for their retirement; they do not and should not transfer moral or practical ownership of those schemes to the Government. Neither do they provide an excuse for the Government to interfere or meddle, beyond protecting the taxpayer from misconduct or maladministration, with how that retirement is to be enjoyed. These amendments would therefore re-establish control for our fellow citizens over their own hard-earned money. They would also protect the taxpayer from being forced to bear the cost of any reckless decisions and allow for a secure income throughout retirement. So I would contend that these amendments are all about choice, freedom and the right to property.
	It is precisely—I must say to the noble Lord, Lord Oakeshott—because this is an issue of principle that I continue to harbour reservations about Amendment No. 80, which we are also debating. I look forward to hearing from him on that subject. This is because Amendment No. 80 concedes the all-important principle relating to freedom of action and seeks only to ameliorate the effects of a bad law. David Laws put it very well indeed at the Committee stage of this Bill in another place when he described the situation in the following terms:
	"The problem here ... is that we have a rather antiquated and illiberal system of obliging people to take annuities".—[Official Report, Commons Pensions Bill Public Bill Committee, 8/2/07; col. 391.]
	That was a fairly firm statement. I look forward to hearing from the noble Lord, Lord Oakeshott, whether in the light of that statement he might feel able to support this group of amendments because Amendment No. 80 would merely postpone the age at which this rather antiquated and illiberal system may continue.
	There is always a temptation when in government to seek to expand one's sphere of influence by exercising control over areas of human activity which are best left alone. There is a consensus that what we need—indeed, what we want—is for people to invest more for their old age. I believe these amendments would enhance the incentive to save, with no ifs and no buts. I beg to move.

Lord Skelmersdale: My name is attached to the amendment because my noble friend Lord Hunt is absolutely spot on. For several years now the position of the Conservative Party has been to abolish the obligation—like my noble friend, I highlight the fact that it is the "obligation" and not the "right"—to take an annuity at the age of 75. Nothing has changed in our determination and it remains our policy today.
	Clearly it would be quite wrong for people to spend all their pension pot before they reached 75, or, indeed, before they died, and we propose the alternative of a retirement income fund so that they will not be able to depend on state benefits. As my noble friend said, the guts of this are to be found in Amendments Nos. 66 and 67. The retirement income fund has been criticised outside this Chamber for being far too complicated, but I do not believe that it is. I remind the Committee that a non-statutory fund can already be built up by way of independent savings accounts. Many people have these ISAs and the tax regime, though very different, is broadly similar in effect. ISAs can be spent tax free at any point. However, once they are spent, the previous owner may still be eligible for state benefits—pension credit, for example. The conditions attached to the retirement income fund avoid this.
	The soon-to-be-former Chancellor has been both obstinate and quirky on this issue: obstinate, because to start with he would brook no argument on annuities; quirky, because he suddenly produced a new pension product, the alternatively secured pension, as a result of lobbying by the Plymouth Brethren, who persuaded him that taking an annuity was a form of gambling, which is anathema to their brand of religion. Although this pension was intended only for them, it was inevitable that pensions consultants would seek to use it to cover other people. So successfully did they do this that he had to rein in the alternatively secured pension in a subsequent Budget.
	Even so, there is an obvious chink in the Chancellor's armour, which should now be broken cleanly and not only for the few. The Government like to give the impression that this set of amendments is only for the few. That is not so. The Bill is the precursor of the plan of the noble Lord, Lord Turner, for personal pensions, which we will be discussing later today. It will take 50 or more years to build a complete pension pot. Page 7 of the Pensions Commission's report reveals its belief that:
	"On reasonable assumptions about rates of return and years of contribution this might secure the median earner a pension at the point of retirement of about 15% of median earnings".
	The White Paper says a very helpful thing at paragraph 5.21:
	"For those who do not make an annuity decision by the age of 75, it will be necessary for annuities to be purchased on behalf of individuals".
	How much better it would be for the retiree to be able to pick his own annuity date. So long as he remains on total income above the pension credit level, no one can complain. Why, so long as people do not end up on state benefits, should they not be allowed to draw down their pension as and when they need it? The same rules should apply to everyone, as do those that apply now—those that we are determined to abolish.

Lord Oakeshott of Seagrove Bay: I feel a considerable sense of déjà vu in this debate. The compulsory taking of annuities was the key issue at the end of our consideration of the previous Pensions Bill in 2004, which the noble Lord, Lord Skelmersdale, and I both remember well. We had repeated ping-pong, and eventually our joint amendment to increase the age for compulsory annuitisation, which ended up being 80, was lost by a small majority.
	Our approach to the Bill is to see whether we can practically improve the situation for people who are compelled to buy annuities. We heard movingly from the noble Lord, Lord Hunt, the appeals to property, liberty and so on. They will not cut any ice with the Government, obviously, but in practice the points can be argued either way. He helpfully—and I was going to make this point—quoted my honourable friend David Laws, who went on to say that the problem,
	"is largely built on the fact that we have a low basic state pension and a great deal of means-testing; therefore, the Government have stuck with these rules over time to try and protect the taxpayer interest. We understand the Government's concerns about compulsory annuitisation, but it is ... part of the price that we pay for having a low foundation".—[Official Report, Commons Pensions Bill Public Bill Committee, 8/2/07; col. 392.]
	The top priority for us on these Benches is to improve the basic state pension as fast as possible and to get away from means-testing, which will reduce the problem. We and the Conservatives argued strongly and clearly last time that, even if one accepts the Government's argument that there should be some protection—and I think that there is a case for it—it makes no sense to have the age of compulsory annuitisation frozen in aspic at 75. That is the practical point where we can move.
	I remember meeting the Minister at the other end at the time, Malcolm Wicks, with my colleague Steve Webb, and having a discussion during which, as he later did publicly, the Minister gave an undertaking that the whole question of compulsory annuitisation would be revisited after the Turner commission reported. The commission reported, but if there was a review we heard nothing about it, and there has been no change in the Government's position. I am bound to say that I feel fairly let down by that process, and I shall focus on holding the Government to account in our consideration of the Bill and forcing them at least to explain why their position makes sense when life expectancy is rising so fast. If it was right to take the decision back in the late 1970s to fix the age at 75, how can it possibly be right to maintain that position indefinitely?
	At the time of the previous Bill, I had quite a discussion with the noble Baroness, Lady Hollis, then the Minister, about how fast life expectancy was increasing. At that time, it seemed common ground that life expectancy had increased by about six and a half years since the age of compulsory annuitisation was fixed at 75. It is now three years later and that figure has now risen to eight years, so the age of compulsory annuitisation would be 83 if one were to put it on the same basis as before. Our amendment suggests 85, but we are reasonable people and are putting that age forward as an initial shot. We would like to hear the Government's response on what a realistic figure would be, given that I thought that, in many ways, they accepted the principle of movement under pressure at the time of the previous Bill.
	Our other problem with the Conservative proposals is that they are complicated. If there is political consensus in this country on pensions, it is that we want simplicity. Nothing could be simpler than to discuss and agree the age, whether 80, 82 or 85, to which the age of compulsory annuitisation should be increased. Everyone knows where they stand. I am afraid to say that when one looks through all the amendments on RIF tabled in the Commons and the Lords, the Conservative Opposition's way is more complicated. It is unrealistic to think that there is any chance of what they propose happening and it is complicated at a time when we all want simplicity. I shall not quote the people who are giving views too much, except to say that the Association of British Insurers is calling for a straightforward increase.
	Let us be practical and put something forward in this House that tries to achieve a realistic way forward rather than something that tries to change the principle on which the Government work, which I do not think that they will change. Let us put something in that is based on the evidence of the change in life expectancy since the rules were last fixed, which is what we asked for in the previous Bill.

Lord Fowler: I am rather amazed by that speech. I seem to remember that at Second Reading the noble Lord, Lord Oakeshott, spoke about compulsory annuitisation. He laid down the gauntlet and said:
	"I am sorry to say that the Conservatives lost their stomach for the fight".—[Official Report, 14/5/07; col. 23.]
	Having listened to that meandering speech, I am not quite sure what fight the noble Lord is in. As far as I can see, the most we can hope for is a brave abstention on the part of the Liberal Democrats. If the noble Lord is going to go for those sorts of policies, he should moderate his language when it comes to Second Reading debates. His option of adding a few years to the annuity age of retirement does not remotely begin to answer to issue.

Lord Oakeshott of Seagrove Bay: It was the stomach for the fight for exactly this amendment, which we could have won last time when it was a joint Conservative/Liberal amendment. We are moving it this time and suggesting that now is a realistic time. It is very clear stomach for a very clear fight, not a different one.

Lord Fowler: The noble Lord has a selective stomach for a fight. I am sorry to say this to him because I am normally on his side, as he well knows, but I found his speech to be one of the more meandering and obscure speeches he has made on pensions for some time. His solution does not answer the principle at all. If it was accepted, it would increase the age for annuities, but it does not answer the principle enunciated by my noble friend Lord Hunt. The essence of his proposal is that it gives choice to the public. Many members of the public may well choose to go for the certainty of an annuity and a tax-free lump sum; that may well be attractive to many people. However, some people may want to exercise their choice in another way. They may want to choose not to have an annuity and to be able to leave some money to their children. It will probably not be a great deal of money, but it will be some money. Provided that the Bill does not come back on the taxpayer in terms of extra benefits—in other words, if someone manages to diffuse his resources in a way that means he becomes dependent on pension credit or other benefit—I cannot for the life of me see the objection. I thought that my noble friend made the case very powerfully.
	We are trying to get more and more people to save for their future. I thought that was what the report of the noble Lord, Lord Turner, was about and what the Government's aim was. Here is a sensible incentive for people to save for their future. What my noble friend said about the Canadian experience was extremely interesting and shows the potential that exists. We have to decide whether we will simply use empty words about trying to get people to save for their future or whether we will take sensible action. This is not the most radical step ever invented. The Treasury has been taking the same stance year after year and its opposition to the proposal is quite ludicrous. The Government should think again, as should the Liberal Democrats.

Lord Turner of Ecchinswell: Compulsory annuitisation was not discussed by the Pensions Commission, essentially because there were so many other issues we had to discuss that we were relieved to be able to leave some things aside. However, we need to address this debate somewhat more rationally than it has been addressed in the past.
	It is fairly clear that there are two arguments, but two arguments only, for compulsory annuitisation. One is that people should not fall back on the means-tested benefits of the state; the other, which is also a legitimate Treasury argument, is that tax relief is given to pension contributions as they go into the scheme, and it is therefore reasonable that as money comes out of the scheme, those are taxed moneys out. The total tax treatment is not more favourable than is intended, allowing for the fact that the most favourable element of the tax treatment is the tax-free lump sum that already exists. However, if we took those two principles, we might well end up with a rule establishing a minimum level of annuity that people had to buy, plus an appropriate set of rules as to the tax treatment if people, at any stage, either through inheritance or taking a lump sum, took the lump sum out. I have found it difficult over the years to understand what the arguments against that approach are.
	I have some concerns that the amendment in the names of the noble Lords, Lord Skelmersdale and Lord Hunt, is a little complicated. I am not sure why one should not end up with something that says that at the date of compulsory annuitisation one has to buy an annuity equal to some specified amount where that specified amount is enough, assuredly, to keep one out of dependence on the state—end of story, with appropriate tax treatment on top.
	This is a debate with strange terms. I have never quite understood why that is not what we are trying to work out. However, I have sympathy with the belief of the noble Lord, Lord Oakeshott, that whatever else we do, we should accept the principle that as the state pension age goes up, the point of compulsory annuitisation should go up at least pari passu, and arguably more than that, to reflect the fact that it has not gone up for many years.
	Whatever is resolved as a result of these amendments, there should at least be an increase in the age. The Treasury, the Government and all parties should think about a provision which goes back to the basic principles of an appropriate Treasury concern about tax treatment and appropriate concern that people are not dependent on means-tested benefits in retirement.

Baroness Hollis of Heigham: I, too, have a lot of sympathy with these amendments. I am not sure that I support them in the form in which they are currently drafted. I worry about their complexity, and in the remarks of the noble Lord, Lord Hunt, I did not notice any mention of the fiscal adjustment that the noble Lord, Lord Turner, identified, which would need to be made.
	This is not about rights—it is about incentivising savings. What is increasingly happening is that annuity pots are no longer the prerogative of the rich—the upper 5 per cent or 10 per cent—and therefore nothing to do with the rest of us. As more of us go on to DC schemes, more of us will find that our pension is in the form of a pension pot rather than a lifetime annuity through a final salary scheme.
	I have figures here that my noble friend was kind enough to give me in January, and they are quite remarkable. A man on median-average earnings over 40 years contributing 4 per cent plus 4 per cent—in other words, the level of the personal account, which is the lowest conceivable level that will exist—in a contracted-in scheme underpinned by a basic state pension and a state second pension would generate £240,000. A rate of 5 per cent plus 5 per cent, which is widespread in the voluntary sector, would generate a pot for that person of nearly £300,000 and, for a woman on median earnings, about £233,000. Those would be conventionally sized pots for people on median earnings in relatively low-contribution DC schemes—in other words, in 10 or 20 years down the line, most people.
	The question then is how we encourage people to save. My criticism of the amendment is not only that it does not address the tax relief issue but that it is not bold enough. I very much liked the amendments tabled, perhaps to the 2004 Bill, that proposed a lifetime savings account. The two reasons why people are unwilling to pay into pension schemes are, first, because they would be gambling on their life expectancy and, secondly, particularly for women, if a catastrophe happens to them such as divorce or disability, they cannot get access to the money. It is tied up for 40 years. In the original Conservative proposals for a lifetime savings account, you could top-slice a fraction of it, as in Singapore and Chile, for possibly defined purposes, and rebuild that sum up again, so you would have an emergency savings fund embedded in your pensions scheme. That was an even more attractive proposition than the one proposed here today. The amendment leaves out part of what it should address and fails to be as bold on the savings issue as it might be.
	I agree with the basic thrust of the argument made by the noble Lord, Lord Turner. The state's public policy, while encouraging savings, is to ensure that no one should have recourse to public funds. Those funds take two forms: recourse to benefits and recourse to unreasonable tax privileges. Let us go back to our person on median-average earnings, with his £240,000 at 4 per cent plus 4 per cent—as I say, a personal account. He will have a BSP and a state second pension, which would together generate £7,000 or £8,000 in today's terms. With £100,000 of that annuitised, it would produce a further £7,000 and an income of around £15,000, which by my calculations would float him off any conceivable recourse to benefits. Now add in a deduction for taxed extra gains—30 per cent or whatever—and that person would still be left with a very useful pot of some £100,000 or more.
	What does it matter to the state what that person does with that money? There is no recourse to benefits and you have neutralised for the fiscal privileges, so why does it matter? I have tried to suggest to the Minister before, although I am not sure that I persuaded him, that the state would make a profit. That sum of money would go into an account—a conservative building society account, perhaps, which would pay interest, the tax on which would go to the Treasury. If some of the money was left in the person's estate, it would go to his children, on which they would pay IHT. So why is there a loser? It is win-win, surely. It is a win for the person who wants to save, a win for public policy for us taxpayers, and a win for the Treasury, which could under certain circumstances actually make a modest profit. Surely everyone is happy.
	I am baffled about why there should be resistance. I could understand it if this was regarded as a perk for the "over-privileged rich" who are "already heavily subsidised" through higher rate tax relief on their pensions, but we are talking about people who are on median earnings or even on the basic personal accounts of the noble Lord, Lord Turner, and who will end up with pots of £239,000 or £240,000 and are contracted in, which means that they are unlikely to have recourse to public benefits. So why should we not do this with those provisos?
	As I say, I cannot support the amendment in this form as it is much too complicated. I also wish that it was bolder by trying to introduce the element of a lifetime savings account. I do not know whether the right Bill to do that is this one or the Bill to be introduced next year, but we need finally to lay this shibboleth to bed.

Lord Higgins: When I retired from the opposition Front Bench as spokesman for work and pensions after eight years, I was clear that I was leaving that responsibility in the talented and admirable hands of my noble friend Lord Skelmersdale. I congratulate him on how he has continued to fulfil that role so diligently. It is a very onerous task.
	At the same time, I resolved not to take part in debates on work and pensions. I should have known better than to sit in the Chamber this afternoon. Like my noble friend Lord Fowler, I was astonished by the speech of the noble Lord, Lord Oakeshott. I moved amendments very similar to those that we are debating now in the debate on the Pensions Bill on 15 November 2004, as reported in Hansard at col. 1224. On that occasion, the noble Lord, Lord Oakeshott, seemed very clear that he was in favour of raising the limit—indeed, of abolishing the limit entirely—and he voted accordingly at col. 1236. Your Lordships' House has carried similar amendments with suitable safeguards—provided in 2004 and today—to ensure that people did not spend the lot and become dependent on the taxpayer. We have carried such provisions on three occasions, the third being the date that I mentioned.
	If I was astonished by the speech of the noble Lord, Lord Oakeshott, I was even more astonished by that of the noble Baroness, Lady Hollis. She also spoke in the 2004 debate, when I had to point out that removing this limit or even raising the age limit—and I am in favour of getting rid of it altogether—would benefit not only the rich. People on lower incomes also would benefit from not drawing their annuity at a particular age and could well take the view that they could get a better annuity if they delayed than if they were forced into it on a particular date. I have taken the view for some time that interest rates will continue to rise and that annuity rates will be higher than they were when we debated the matter in 2004. However, that advantage, that choice, would benefit not only those with relatively large pension funds. I welcome the noble Baroness on this road to Damascus; it is good that she can now recognise that. Nevertheless, it is very difficult to reconcile her speech today with the one she made in 2004.
	This has been going on far, far too long. Your Lordships' House has agreed to amendments of this type three times, and I very much hope that the Committee will agree to them again today. This matter needs to be resolved. It is absurd that people should continue—subject to the point made by the noble Lord, Lord Turner, about the tax treatment arrangements—to be denied that choice and forced to take an annuity at a moment that is disadvantageous to them, with absolutely no benefit to the Treasury. I hope very much that your Lordships will support this amendment, moved so admirably by my noble friend Lord Hunt.

Lord Howarth of Newport: The arguments have been laid out very powerfully. My noble friend Lady Hollis has come among us unmuzzled. Therefore, I shall briefly add an extra plea from these Benches to the Minister that the Government should look sympathetically and constructively at the case for ending the obligation to annuitise at 75 or, indeed, at any age. I am not attracted by the Liberal Democrat proposal to defer the evil day. The Government need to produce their arguments, if they have any, about what the difficulties would be. Why should people be required to annuitise at any age? Why should capital, over and beyond what is needed to keep people independent of social security, be passed to an insurance company? Why should a saver not be able to pass it on in his or her estate, provided that tax relief is repaid and inheritance tax is paid on that estate? The net sums may not be terribly large after all that, but I still think that the principle is right.
	As has been argued, we should encourage people to save. It is essential that we get coherence into savings policy and ensure systematic encouragement for people to save, instead of policies which contradict each other at different phases of life—there is tax relief to encourage pension savings but then you are told that the capital sum built up in your pension pot will be taken away from you. That does not seem a rational policy. As my noble friend also pointed out, would not the Exchequer do rather well? What on Earth is the difficulty?

Lord Blackwell: I wish to speak briefly to the four amendments in this group in the names of my noble friends. For the reasons set out by the noble Baroness, Lady Hollis, we have to recognise that the annuity rules are a major disincentive to people accumulating savings in a pension plan. Like her, I think that the best solution would be to move away entirely from this stricture towards a much more flexible lifetime savings account, and sooner or later we shall get there. However, I recognise that we are dealing with a Pensions Bill this afternoon, and it seems to me that dealing with annuities in this way is a sensible first step.
	Reading these amendments, I anticipated that the kind of objection made by the noble Lord, Lord Oakeshott, about the complexity of these arrangements, would be raised. Therefore, it would be useful, if the Government are bringing up the argument about complexity, to know whether that is the sole reason for their objection or whether they would be open to dialogue on whether different arrangements could be made. For example, the noble Lord, Lord Turner, suggested that people should be required to buy a fixed annuity and then be free to spend the rest of the capital; alternatively, if the Government do not want to introduce those conditions, they could specify a minimum level of capital that had to be kept within the scheme at certain ages. There are lots of ways that those measures could be simplified to achieve the same end of ensuring that people do not fall back on benefits while dealing with the tax issue on other funds that are taken out. It is important that we know whether the Government are against annuitisation relief in principle or whether it is simply a question of finding a practical way round it.
	I cannot sit down without making the further point that another aspect of the disincentive of annuities is the inability to pass savings in pension pots on to the next generation. If money is saved in a pension pot, surely others who will need a pension pot later could also benefit from it. Do the Government accept that it is beneficial to take money left in a pension fund at the end of a life and pass it into a pension fund of the next generation without tax being taken from it? I recognise that I am extending the argument slightly.

Baroness Howe of Idlicote: At Second Reading I was rather dubious about the benefits of raising the age at which you could take annuities, but the more I have listened to what has been said this afternoon, the more convinced of them I have become. We have the noble Baroness, Lady Hollis, on side, as it were. I have been through the same procedure with her on one or two other occasions, when I was told that my amendment, which will come up later, had no basis of justification. But now that we have heard from her about all the benefits that would arise from this measure, I am even more convinced. There will still be a pot, albeit a discriminatory figure, of some £233,000 for a woman who retires, compared with some £240,000 that an equivalent man would receive. Nevertheless, it is a lot of money and, as we have heard, it is highly likely that the sum will grow with inflation. If we can delay payment until as late as age 85, it is possible that by then no one will be able to argue that the gap between men and women has not closed in every sense; almost certainly, the ages at which men and women die will be closer together. For those reasons, I now very much support the amendment, not least because it will contribute a little to the arguments that I shall advance later.

Lord Turner of Ecchinswell: Perhaps I may add two comments. First, I support and reiterate the words of the noble Lord, Lord Blackwell, who correctly asked the Government to be clear whether they objected in principle to the amendment or simply on the basis of detail and complexity. The noble Lord, Lord Hunt, said that the Government expressed concern in another place that few people would take up that option. It is somewhat strange to use that as an argument, given that the alternative assured scheme was introduced for the 750 wonderful members of the Plymouth Brethren, although they are small in number.
	Secondly, we said in the Pensions Commission report that there is an issue regarding the total capacity of the insurance sector to write the scale of annuities for which there could be demand. As we shift from defined benefit pension schemes to defined contribution schemes, a previously implicit process of annuitisation within defined benefit schemes is becoming an overt purchase of annuities from insurance companies. There is an issue about the capital capacity of insurance companies to write the sheer scale of annuities that will be demanded. The bigger the imbalance is between demand for and supply of that capacity, the lower the annuity rates will be.
	There is an interest for everyone who buys an annuity in ensuring that those who do not need to buy one do not push their demand into the market and therefore decrease yields. That is a serious point. It is a benefit not simply for those who have chosen not to buy annuities but for those who buy them, as the vast majority of people will.

Lord McKenzie of Luton: I welcome the debate, although I feel a little lonely. I missed out on the debate in 2004—I had just arrived in the House during the final stages of that Bill. I will respond in particular on the Government's view on practicalities and on principle.
	The Annuities Market, published with the Pre-Budget Report 2006, restated government policy on turning tax-privileged pension saving into retirement income by purchasing an annuity by the age of 75. It also responded to the views of the Pensions Commission. I reiterate our belief that pension saving is about giving individuals an income in retirement and nothing else. The Government provide tax incentives to encourage people to save for retirement. In 2006-07 those were in total some £16.3 billion. When an individual takes their pension benefits they can take up to 25 per cent of the pension fund as a tax-free lump sum, which is a not inconsiderable benefit.
	In return for those generous incentives, the Government have required, as part of the deal, that the remainder of the pension fund is, by the age of 75, converted into a secure retirement income for life, or is used to provide for dependants' benefits. The Government believe that the most efficient way of doing this is by purchasing an annuity.
	As we know, annuities provide the peace of mind of an income for life regardless of how long that may be. While they provide "simplicity", "security", "a guaranteed income" and "little risk", some feel that they are inflexible and represent poor value for money or prevent them passing on their pension to heirs on death. The Annuities Market responded to these issues.
	In terms of bequests, more than half of a pension fund might consist of tax relief. There is no rationale for the taxpayer subsidising bequests. Individuals wishing to pass on assets at death have a number of non-pension vehicles to choose from. Individuals have flexibility to annuitise between the ages of 50—or 55 from 2010—and 75 to suit their circumstances. The noble Lord, Lord Higgins, referred to people being forced into an annuity at the wrong time, but there is a fair spread of years within which to make your choice. Consumers can now choose from an increasing range of annuities, including those that facilitate a flexible retirement or take on investment risk.
	The noble Lord, Lord Turner, referred to pressures on the annuities market. In recent years, despite what I think is a threefold increase in the level of investment in annuities, the market has coped and innovated. The Government are keen to work with the market to see further innovation.
	The most comprehensive UK pricing survey, published in 2006, showed that annuities are priced fairly. Today's annuity rates need to be seen in the context of the low inflationary environment and the fact that people are living longer. The Government welcomed what we perceived to be the Pensions Commission's endorsement of this broad policy. It stated:
	"Since the whole objective of either compelling or encouraging people to save, and of providing tax relief as an incentive is to ensure people make adequate provision, it is reasonable to require that pensions savings is turned into regular pension income at some time".
	Let me turn to the proposed new clause which would establish a "retirement income fund" as an alternative to annuities to deliver an income stream in retirement. The RIF has appeared in various guises in the past, but I would like to restate that it is incompatible with government policy. The RIF would remain invested and withdrawals between a minimum and maximum would be permitted. An "annual maximum withdrawal" allowance would be set by the provider for each member, based on an assessment of their life expectancy. A member's withdrawals from the fund could not, in a year, exceed that allowance. An "annual minimum withdrawal" allowance would also be set by the provider, and we presume that a member must withdraw at least this each year. In setting this, the provider would have to ensure that the member's total income was at least equivalent to a "minimum retirement income", as that is defined in the proposed new clause.
	Nothing in the proposed new clause appears to stop the minimum allowance being set at zero. Provided that the member's income from other sources for future years is greater than an MRI, it appears that there is effectively no maximum withdrawal from the RIF—in which case the member can draw any income. Additionally, in such a situation, an individual might choose not to draw any pension income at all from the RIF in order to pass the fund on to heirs.
	Like previous amendments, this proposal is silent on how RIF withdrawals will be taxed and what will happen on a member's death. I listened with great interest to the noble Lord, Lord Hunt, to see what he was going to say about that. My noble friend Lady Hollis picked up on that point. In a sense, I thought that the game was given away by the noble Lords, Lord Fowler and Lord Blackwell, who said that it is right that people should be able to pass something on to their children. Of course it is. However, to use pension tax privilege schemes of this nature to do so is not what the scheme is about. I presume that the intention is that RIF withdrawals would be taxed. RIF savings would be tax-advantaged compared with other forms of savings. Given the apparent ability to extract RIF savings below the annual maximum allowance, there is a danger that it would become a vehicle into which other savings are recycled for tax advantage rather than encourage new retirement savings.
	Several noble Lords referred to the alternative secure pensions regime. Does not history prove that, where you create special arrangements and change the rules, people pile in and try to abuse the purpose for which the arrangements were created? One could see exactly that situation flowing from these arrangements, if we were to accept them. As such, I fear that the proposed new clause is designed to allow a small group of individuals to pass on their pension funds to their heirs on death and not, as intended, to secure a retirement income. Perhaps I may reiterate in a little more detail the deal on pension tax and why the RIF amendment clearly violates it. The Government provide—

Lord Higgins: How small is this group?

Lord McKenzie of Luton: I was going to raise this in relation to what my noble friend Lady Hollis said, but today's average annuity is purchased for around £23,500, with only 10 per cent of annuity purchases being over £50,000 and 3 per cent in excess of £100,000.

Lord Higgins: That is not what I asked. I asked how small this group of people is.

Lord McKenzie of Luton: The people who could benefit from these arrangements are those who have significant pension pots. Research has shown that you need a pot of about £100,000 to be able to go down the alternative route of income withdrawal schemes, with all the asset management and associated costs that that entails, so it is not an arrangement that would be available to people in general.

Lord Fowler: Surely the Government's whole purpose is to try to create this kind of pot. The noble Lord is looking backwards but surely the whole point of his policy is to create a situation whereby people will have more than £100,000.

Lord McKenzie of Luton: Of course we want that to happen, but I am not looking backwards; I am looking at where we are and at what pension pots are available today. My noble friend Lady Hollis is right about the sort of pots that people could accumulate under the new savings arrangements if one projects forward over 40 years, and we should welcome that. This situation does not necessarily continue for ever, but that is quite different from saying that today people on median earnings could take advantage of these sorts of arrangements. In my view, that is simply not the case.

Lord Higgins: The noble Lord said that only a small group of people are affected. I ask him for the third time how small that group is.

Lord McKenzie of Luton: The people who could use these arrangements are those in the 3 per cent group with pension pots in excess of £100,000. If the noble Lord is asking me the number of people involved, I do not have the precise figure but I shall be happy to return to the matter. The group is only 3 per cent of those with pension pots. He shakes his head; I am not sure whether he is disagreeing with the figure of 3 per cent or whether the figure is insufficiently focused to deal with the question that he raised.

Lord Skelmersdale: Before the noble Lord moves on, he has just given figures for today's annuity rates. Can he give them for last year or perhaps the year before?

Lord McKenzie of Luton: The figures that I gave related to annuity pots and the percentage of people who benefited from those annuity pots. Of course, annuity rates change. As I think we all recognise, they are impacted by inflation and longevity assumptions and by what is happening with interest rates, so they are bound to change. I am not sure what point the noble Lord was pressing.
	As I have already set out, I fear that the RIF would quickly become heavily marketed and used as a vehicle for saving funds for inheritance. That is clearly not part of the deal for giving tax relief. If I misunderstand the purpose—

Lord Blackwell: If the Minister's major concern is the tax loophole, can he envisage our discussing tax arrangements which would close that loophole and ensure that money going in with a tax advantage was not improperly used? I do not think that anyone is arguing that the fund should be used as an improper tax loophole but, if that is the basis of his concern, can we not discuss how to find a solution to it?

Baroness Hollis of Heigham: I cannot support these amendments because of the way in which they are framed, but, in principle, if one could devise a structure that ensured that there was no recourse to public funds, but because you needed to take an annuity to float you off benefit levels at a sum to be determined by the Secretary of State and, on the withdrawals of money, there was a fiscal adjustment so that it was financially neutral, would my noble friend then withdraw his objections?

Lord McKenzie of Luton: My answer to that is no, because the Government's starting point is, as I said, that the deal on pensions, and the tax structure that surrounds it, is tax relief on the way in, tax-free accumulation up to a point in time and then the need to convert that into secure income. My objections to this are several—I shall come to some of the practicalities, certainly the potential tax effects—and indeed it violates what we see as the clear principle in all this.
	I would explain the attraction of the RIF for those individuals who could afford not to use their pension scheme to provide an income, but I shall skip that point, as I have already touched on it. However, if the noble Lord wants me to, I shall continue. Those who do not need to use their pension funds to provide an income could instead let it build up tax-free in their pension scheme and pass it on, in due course, to their heirs. Current tax rules do not permit lump sums to be paid out where a member dies after age 75, so any such payments will attract unauthorised payment charges of up to 70 per cent. In the context of the deal that I have just described, noble Lords will see that this charge recoups all reliefs given when the money went into the fund and on the income and capital growth while it was there.
	As I have said, the amendment before us is silent on what payments can be made out of the fund on death and how those might be taxed. I do not know what the mover of the amendment had in mind—I would invite him to help us on that, but I am sure that he will do so when he winds up. It is clearly envisaged that a person can build up capital in their RIF without drawing an income. That leads me to conclude that the intention is that funds may be paid out of the RIF when the member dies after age 75 without unauthorised payment charges. As I have said, there is no rationale for the general body of taxpayers to subsidise bequests through tax relief on pensions. Those who want to save for bequests have a range of savings and investment vehicles available to them. The features of the RIF also give us a clue as to whom this amendment is aimed at.
	Anyone taking out a RIF would need to absorb simultaneously investment and longevity risk and it is likely that they would need alternative assets to do so. The ongoing charges of managing a RIF are likely to be significantly more than for conventional annuities. In many ways, the RIF resembles income drawdown—currently available up to age 75—whereby the pension fund remains invested and parts of it, within limits, can be withdrawn. It is likely to have a similar charge profile to the RIF's. We know, as this is documented in the Annuities Marketpublication, that income drawdown in its current form tends to be economic for funds of over £100,000—currently less than 5 per cent of pension funds. This is not a vehicle that will be of benefit or use to a whole range of pension savers.
	I now turn to another aspect of the RIF. As I understand it, under the proposed RIF, no individual's total future income could fall below a minimum income requirement. We could have an entire debate on what constitutes a reasonable level, but I will limit myself to pointing out that such a process would be bureaucratic.
	Another flaw of the RIF is the risk of running out of money in retirement. I note the noble Lord's faith in insurers' ability to predict accurately an individual's life expectancy. Surely no one can do that. Insurers can predict average life expectancy of particular cohorts. That enables them to provide a guaranteed income for life, regardless of how long that life is. The RIF seeks to take an individual view on an individual's life expectancy, which seems to me to be a very difficult thing to propose as being possible. One can envisage someone well into their 90s, whose pension pot has run out, pursuing their pension advisers, saying, "You told me I would only live to 85". Some very strange circumstances could flow from that.
	Insurers efficiently spread, or pool, this so-called longevity risk across individuals. As some people in a pool of annuitants die earlier than expected, the insurer can carry on paying those living longer than expected. So early death does not result in "profit" for the insurer, but pays the pensions of those living longer than expected. Annuities are effectively insurance contracts, insuring individuals against the risk of outliving their pension funds.
	I can only conclude that the RIF would be a complex product aimed at the wealthy at the expense of the taxpayer. By contrast, the Government are committed to promoting better outcomes for all pensioners in retirement. For example, the Government have set out proposals on personal accounts as a simple low-cost pension savings vehicle, which we hope and believe will lead to significant accumulation over time, as my noble friend Lady Hollis identified. The Government welcome innovative ideas for retirement income products for all.

Noble Lords: Oh!

Lord McKenzie of Luton: Indeed we do, as noble Lords will see if they look at what has happened to the annuities market in recent years and the range of different products that have been developed. The Government are in continual discussion on these matters so that new products are in line with the principle of securing a retirement income.
	The Government are clear, however, that innovation must take place in line with the principle of tax-privileged pension savings being used to provide a retirement income. We believe that RIF clearly violates that principle. The Government's opposition to this measure is driven by a matter of principle. I was asked to set that out. The proposal would also involve a cost to the Exchequer. In most cases I would expect the likely tax charge on RIF withdrawals to be less, often considerably, than the amount of tax relief enjoyed on these funds. It would be unfair to expect taxpayers to foot the bill for people who take tax relief for pension savings but who choose to spend the money on something else.
	On the repeal of paragraph 16(1)(a) Schedule 29, value-protected annuities were permitted from 6 April 2006. They allow providers to offer an annuity that includes a repayment on death before 75 of an amount representing the initial capital value of an individual's pension or annuity, less any income paid before the date of death. This repeal would abolish the current age limit of 75 where value protection can be offered.
	A common issue raised by consumers with annuities is the risk of dying soon after purchasing the annuity and the concern that the annuitant might not receive a financial benefit. Such concerns tend to misunderstand the basic insurance properties of annuities and the role of pooling. The benefit of buying insurance is the peace of mind provided that, even if an event did not occur and no claim was made, the income would be secure. But if the insured event does not occur—for example, in the case of someone living longer than expected—there is no return of the premium. So an annuitant's early death does not result in profit for the insurer, as I said.
	Nevertheless, the Government have responded to concerns about early death by enabling providers to offer value-protected annuities in the early stages of retirement. This option expires at age 75. Abolishing the current age-75 limit would tend to benefit those more interested in using their pension fund for inheritance planning rather than for providing a retirement income.
	I have taken some time to set out the policy on this matter because I was particularly pressed on it and because of the range of comments made. In essence, these amendments seek to benefit those who willingly take advantage of tax reliefs given for pension savings to build up a substantial pension pot, but who want to break their part of the deal and use tax-privileged moneys for other purposes. I therefore urge the noble Lord to withdraw the amendment.
	I turn to the amendment on increasing the upper age limit of annuitisation from 75 to 85, proposed by the noble Lord, Lord Oakeshott. While this deals with a particular aspect of annuities policy, I fear that it is motivated by similar reasoning to that behind the RIF amendment, which I have already spoken about. As I set out, given that the Government provide generous tax incentives to encourage people to save for retirement, it is clearly important that we ensure that those moneys are used for the purpose for which they were granted. Annuities not only achieve this but provide the peace of mind of an income for life regardless of how long that life may be.
	Within those overarching principles, people have considerable latitude on when to purchase their annuity. As I said to the noble Lord, Lord Higgins, they currently have a 25-year window between the age of 50 and age 75 in which to annuitise. Even after 2010, when the lower limit rises to age 55, people will still have a 20-year period in which to choose to annuitise best to suit their circumstances. That is close to a quarter of the typical male life expectancy. That significant current flexibility is little used at the upper limit. Only 5 per cent of people annuitise after age 70. The reason for that is that the vast majority of people need to draw on their pension savings in retirement—after all, that is why they saved in the first place.
	However, a fortunate few who have made pension savings and taken the tax reliefs that go with them are able to delay annuitisation for a lengthy period post-retirement. They have sufficient wealth from other income and assets and are able to absorb the investment and longevity risks inherent in delaying annuitisation. Prior to annuitising, should the pension fundholder die, their nominated representative can inherit a tax-free lump sum, of which more than half could consist of tax relief granted for pension savings.
	By raising the age limit by which a person must annuitise from age 75 to age 85, the amendment would significantly weaken the principle that pension funds built up with generous tax relief should be converted into a secure retirement income for life. Those who would benefit would be the small group who could afford to take advantage of the considerable latitude to delay annuitisation beyond age 75. There is no rationale for taxpayers subsidising bequests. Individuals who want to pass on assets at death have a number of non-pension vehicles to choose from.
	I also draw the Committee's attention to the potential costs to the Exchequer of moving the age limit in that way. It is not possible to quantify that exactly because of uncertainties about behavioural effects, among other things, but although only relatively few people would benefit from the change, because they would typically be the better-off, the sums involved could amount to tens of millions of pounds, all for the benefit of the few individuals who would be using the relief given for pension savings as a means to pass on tax-advantaged lump sums to their heirs.
	The Government do not believe that there is currently a case for changing the upper limit. As working longer is an integral part of reforms to meet the pensions challenge, the Government will of course continue to keep both the lower and upper limits under review.
	In summary, the amendment, like the RIF, would undermine current policy on pension savings and decumulation. It would benefit those who willingly take advantage of tax reliefs given for pension savings to build up substantial pension pots but who want to break their part of the deal and use tax-privileged moneys for other purposes. Accordingly, I urge the noble Lord not to press his amendment.
	I shall try to ensure that I cover all the points raised. Several noble Lords asked about choice. There is choice to act within or without a pension regime. Even within the pension regime, there is the 25 per cent tax-free lump sum, which is an added opportunity for people to save outside the scheme at some point. I understand the point made by my noble friend Lady Hollis, but I do not believe that it is right to say, as of today, that the issue affects people on median earnings. She is absolutely right to say that the landscape in 20, 30 or 40 years could be different and may well call for a change in the regime, but that situation is not with us now. I hope that I have covered all the points raised but, if not, I shall certainly try again. I urge the noble Lord to withdraw the amendment.

Lord Hunt of Wirral: This has been a very important debate and I am very grateful to everyone who has contributed. I hope that the Committee will forgive me if I do not now make a detailed response to all the points that have been raised. The overwhelming majority of the speakers have been in favour of doing something. The sole exception has been the Minister, who has been, to use his own words, the lonely person in this debate. He has made my task much easier. I need not go into great detail, because he has made this test of opinion an issue of principle. He responded to the former Minister—the noble Baroness, Lady Hollis—and to my noble friend Lord Blackwell by saying that the Government are not to be persuaded, even if all the detail is supplied. Of course, once the Committee has expressed its opinion, it is perfectly possible to set out further details such as the tax, the fiscal adjustment and various other elements mentioned by the noble Lord, Lord Turner. That is fine, but let us now have a decision on the issue of principle.
	As the noble Lord, Lord Oakeshott, recovers from the rather devastating criticism of him by my noble friend Lord Fowler—incidentally, was it not wonderful to hear the noble Lord, Lord Higgins, again on this subject?—I will quote again Mr Laws, his friend in the other place, who described the present system as "illiberal". If there is one word that can persuade him and his colleagues, surely it is that. I would now like to see whether the Committee agrees with Mr Laws, with me and with the majority of speakers that this present system is iniquitous and illiberal. I wish to test the opinion of the Committee.

On Question, Whether the said amendment (No. 65) shall be agreed to?
	Their Lordships divided: Contents, 145; Not-Contents, 140.

Resolved in the affirmative, and amendment agreed to accordingly.

Lord Hunt of Wirral: moved Amendments Nos. 66 and 67:
	After Clause 18, insert the following new Clause—
	"Retirement income fund
	(1) The Finance Act 2004 (c. 12) is amended as follows.
	(2) After section 152 (meaning of "arrangement"), insert—
	"152A Meaning of "retirement income fund"
	(1) In this Part a retirement income fund means a scheme for the reinvestment of savings in retirement which—
	(a) is operated by or on behalf of a person authorised to operate a registered pension scheme,(b) is a scheme in which investments are approved by the Inland Revenue, and(c) meets the conditions set out in subsections (2) to (9).
	(2) The first condition is that, subject to the other conditions in this section, funds held in the retirement income fund may be invested and withdrawn by the member as and when he elects.
	(3) The second condition is that an authorised retirement income fund provider must set an annual maximum withdrawal allowance for each member, based on an assessment of each member's life expectancy, and a member's withdrawals from the fund in any one year must not exceed that allowance.
	(4) The third condition is that, in setting annual maximum withdrawal allowances, an authorised provider must ensure that no member's total future annual income falls below the minimum retirement income level, as set under section (Minimum retirement income) of the Pensions Act 2007, except in the circumstances provided for in the sixth condition.
	(5) The fourth condition is that an authorised provider must set an annual minimum withdrawal allowance so that each member's total income is at least equivalent to the minimum retirement income level, except in the circumstances provided for in the sixth condition.
	(6) The fifth condition is that where a member chooses not to declare his total annual income to the authorised provider he must withdraw funds equivalent to the level of the minimum retirement income level or his annual maximum withdrawal allowance, whichever is the lower.
	(7) The sixth condition is that, where there are insufficient funds to enable the annual minimum withdrawal allowance to be set so that a member's total income is at least equivalent to the minimum retirement income level, the allowance should be set at the highest level consistent with the assessment of the member's life expectancy.
	(8) The seventh condition is that the maximum and minimum withdrawal allowances must be set at the same level where a member's total annual income, including his maximum withdrawal allowance, is lower than the minimum retirement income level.
	(9) The eighth condition is that a retirement income fund, and any income derived from it, must not be capable of assignment or surrender by the member.""
	After Clause 18, insert the following new Clause—
	"Withdrawal from a retirement income fund
	(1) Section 165 of the Finance Act 2004 (c. 12) (pension rules) is amended as follows.
	(2) In subsection (1) (which sets out the pension rules)—
	(a) in Pension rule 4, after paragraph (a), insert—"(aa) a withdrawal from a retirement income fund,";(b) in Pension rule 4, after the second appearance of the words "scheme pension", insert the words "a withdrawal from a retirement income fund";(c) in Pension rule 6, after paragraph (a), insert— "(aa) a withdrawal from a retirement income fund,";(d) in Pension rule 6, after the second appearance of the words "scheme pension", insert the words "a withdrawal from a retirement income fund"."
	On Question, amendments agreed to.

Lord Skelmersdale: moved Amendment No. 68:
	After Clause 18, insert the following new Clause—
	"Financial assistance scheme: scheme manager
	(1) The Financial Assistance Scheme Regulations 2005 (S.I. 2005/1986) are amended as follows.
	(2) In regulation 5(1) for "Secretary of State" substitute "Board of the Pension Protection Fund ("the Board")".
	(3) In regulation 5(2)(a) omit the words from "Secretary of State" to the end of that paragraph and insert "the Board".
	(4) In regulation 5, sub-paragraph (2)(b) is omitted."

Lord Skelmersdale: We turn now to a different but equally pressing and disastrous subject. I shall speak also to Amendments Nos. 69 to 76, and to Amendment No. 79, tabled by the noble Lord, Lord Oakeshott. There is no doubt that the Government have gone from bad to worse on the subject of pensions, as proven by all our debates over a number of years. From their reaction to the original mis-selling of occupational pensions to how they have handled the thousands of people who have lost their retirement income as a result, the Government have rejected expert advice and seem to be going out of their way to pay compensation in the most grudging manner possible.
	Noble Lords will remember that the Parliamentary Ombudsman published a thorough and impartial study of the reasons behind the scheme's collapse and included a number of balanced recommendations for what the Government could be expected to do to remedy the mistakes that she found they had made. Her report showed that there was incontrovertible maladministration by this Government in their handling of occupational pensions. Government leaflets and press statements all refused to make clear the inadequacy of the minimum funding requirement but instead were "vague, incomplete or misleading". She specified occasions where the Government were shown to have known this and where they failed to inform the public, continuing to encourage pensioners to invest their salaries into schemes in which they were unable to afford to provide what they were promising.
	To add insult to injury, it is apparent that one of the factors that weakened the minimum funding requirement was the Chancellor's decision to abolish the system of tax credits given to those pension schemes. I am sure we will hear, once again, how rising longevity and a weakened stock market were also to blame—and, of course, they were—but can the Minister really assure the Committee, as he tried to the other day, that he believes that a raid of £5 billion a year had a negligible effect? If he can, my response is that not only the ombudsman but DWP and Treasury officials do not agree with him. It is now clear that, like an amateur magician's attempt at the Indian rope trick, the Chancellor's figures simply do not stand up. The Government's promises were found to be hollow, the pension scheme's funding was found to be inadequate and thousands of pensioners are now without their retirement income.
	The Parliamentary Ombudsman could not have been a more suitable, better qualified or more appropriate person to judge the unfortunate situation that these pensioners found themselves in, yet despite the evidence and expertise to back her up, the Government have persisted in mud-slinging and depreciation of her findings. They have been taken to court by a group of pensioners, have lost and have still not accepted the report's findings. Instead, we are witnessing the unedifying sight of endless appeals, rising costs and never-ending delays, while hope slowly dwindles that the Government will finally accept publicly what everyone knows and what the ombudsman has so clearly laid out.
	The Government have consistently fought tooth and nail against setting up an adequate compensation scheme for those who have lost out. It was only in the face of enormous cross-party opposition that they set up the financial assistance scheme in the first place and, again, they have recently been forced to introduce a new clause to improve on that scheme. This new clause is still not enough. It pays out only 80 per cent of what the department calls the "core pension", which, by the Government's own admission, amounts to only 60 per cent of a person's expected pension. That is paid only from 65, ignoring the originally agreed pension age of the scheme and any other benefits, such as taking a lump sum, which may have been promised.
	So far, the FAS is compensating less than 10 per cent of those who are eligible—that is, those who lost their pensions through their schemes being underfunded when their employers went bankrupt and who are over state pension age. I expect the Minister to reassure us that, now the set-up is complete and the computer is up and running, more payments will be made and the administrative costs will fall to a less shocking proportion of the total costs.
	When the financial assistance scheme was set up, it had a budget of £400 million, which was meant to cover 15,000 pensioners. It was then extended to 40,000 pensioners and a few more billion pounds were put in. The scheme was then further extended to cover everyone and more money was put in. There are today some 125,000 pensioners. We on this side of the Committee have always said that £400 million was nothing like enough money. The Chancellor has finally, to a limited extent, agreed by setting aside £8 billion over the lifetime of the FAS. I accept that this money is of a quite different order of magnitude from the £400 million originally proposed in 2004, which, although finite, might have to last another 30 or more years. The £8 billion is meant to cover the lifetime of the scheme; it is, though, a headline figure. Will the Minister confirm that its net present value is quite a bit less, £1.9 billion on my calculations? Will he also tell us how much this represents on an annual basis; in other words, the cash flow from the Treasury? Will it still only cover 60 per cent of expected pensions; in other words, 80 per cent of core pensions? I know the Minister has the words "core pensions" graven on his heart, rather like Mary, Queen of Scots.
	As a perfect example of how the Government have handled this issue from the start, they have now unwillingly accepted, as reported at col. 320 of Commons Hansard, that pensioners whose employers are still solvent, but whose pension schemes have been closed without sufficient funds, should be covered; that is, the FAS will eventually cover members of schemes that began winding up between 1 January 1997 and 5 April 2005 when a compromise agreement is in place and when enforcing the debt against the employer would have forced that employer into insolvency. It is thought that there are another 8,000 members of some 15 schemes in this particular limbo, yet we are being told that the necessary secondary legislation will be published by the end of the year. That is not anything like quickly enough for the thousands who are waiting for it, the thousands who are impoverished and may be sick or disabled. We owe it to them to pay over this money as quickly as is humanly possible.
	Some of those people, however, will not survive. Another example of unhelpful government action is that of survivor pensions. Will the Minister confirm that these amount to 50 per cent of the core pension; in other words, only 30 per cent of their partner's expected pension had they not died?
	The amendment covers the arrangements of the Pension Protection Scheme. PPS survivors get a much fairer 45 per cent. The Government appear to believe that Clause 18 and its extra money will be enough to satisfy the pensioners, some of whom are demonstrating outside this Chamber. It quite clearly is not. First, there is still to be a cap, though a more generous one, on the amount paid out. Currently that is 80 per cent of core pensions. Why was 80 per cent chosen? Why not the 90 per cent payable under the Pension Protection Fund, which the 2004 Act sensibly set up? Over and above that, why make provision for the dissolution of the management of the FAS and move it over to the Pensions Agency? What is wrong with rolling it into the Pension Protection Fund, which is already doing a similar, though insurance-based, job? Why set up an inquiry to ascertain whether there are other sources of non-government funding available when we all know that money exists in the Unclaimed Assets Register, to which insurance firms and others belong?
	We all know that the Government will, in the end, do more for FAS pensioners. The Minister will doubtless question that, but I remind him that when the will and the law are there, the money is always found. This year's statutory uprating of benefits cost the taxpayer £3.5 billion. I invite your Lordships to set that against the annual payment to the FAS.
	It is against that background that the noble Lord, Lord Oakeshott, and I have set down this group of amendments. Amendment No. 68 is a paving amendment to amalgamate the management of the FAS with that of the Pension Protection Fund. Amendment No. 69 expands the FAS to apply to employees whose pension schemes have failed, even though their employer has remained solvent. That is what the Government are going to do, but rather quicker—a lot quicker, in fact.
	Amendment No. 70 is the longest and most important of the group, which all together would set up a pension protection lifeboat fund. The fund would have several objectives: not only would it be run by the Pension Protection Fund, but it would make supplementary payments to eligible pensioners from their normal retirement age under their pension scheme, with no compulsory annuitising. That would be paid for in the first instance as loans by the Secretary of State and repaid under Amendments Nos. 70 to 74, which would set up an unclaimed assets recovery fund, the functions of which would be to ascertain whether non-governmental assets were available and then transfer them to the lifeboat fund. We already know that such assets exist in the insurance and pensions world, because at least one firm has admitted as much. We also already know that unclaimed assets of banks, which would have been suitable for the lifeboat fund, are being investigated by the Chancellor, and it is likely that he will use them for other purposes, not least for charities. Other sources, such as unclaimed premium bond prizes, could be included at the discretion of the Secretary of State. The lifeboat fund is to repay any assets that are subsequently claimed back by the missing owners.
	In reply to the Statement about the Government's response to the ombudsman's report, I made the point that no Government could be expected to write a blank cheque. However, this is a source of non-government income for these pensioners at the right time because it will become available far more quickly than income under the Government's plan of investigating assets and then legislating for their use in a future pensions Bill. These pensioners need money as soon as possible and cannot be expected to wait a moment longer than is necessary. I beg to move.

Lord Oakeshott of Seagrove Bay: I am delighted to stand shoulder to shoulder with the Conservatives on this amendment, and I am equally delighted to see them show as much vigour on behalf of some of the poorest and most destitute people in our society as they showed on the previous amendment for a rather richer group.
	This has been a shameful story. The noble Lord, Lord Skelmersdale, identified very well some of the financial aspects of this problem, and I shall return to them; but there is also an issue of principle about democracy and how the Government have brushed aside repeated rulings from independent bodies and requests to think again. We have had a ruling from the European Court of Justice, a very serious and well argued ruling from the High Court, a thorough, well argued and comprehensive report from the ombudsman and a report, which went into considerable detail, from the Public Administration Committee of the House of Commons. Those bodies are four important pillars of democratic society in our country and in the European Union, of which we form part, and in each case the Government's attitude has been simply disgraceful. They have not accepted that anyone apart from them can rule on these issues, particularly when we are talking about a charge of maladministration. No one is suggesting that the Government are wholly responsible for these problems—far from it. However, it is arrogance of the highest order to suggest that they have no responsibility and that their view should prevail—almost saying that the ombudsman, in particular, has no standing—including the things that have come out recently about the defence that the Government are trying to put in the High Court against the ombudsman's case. That is where this Chamber of Parliament comes in. There is a wider issue: when the Government ignore these reports and rulings, we can say that they should and must think again. The issue is wider than the injustice and real hardship that these 125,000 pensioners have faced.
	The Government have been forced kicking and screaming to improve, slowly, this miserable little scheme. During the passage of the previous Pensions Bill, we repeatedly pressed them to explain how the scheme was going to work, but we were given nothing. These Benches repeatedly suggested that it would be better to combine the scheme with the Pension Protection Fund, and the history of delay and incompetence in beginning to pay people because of having to set up a completely separate organisation has vindicated us. So far, about £3.6 million has been paid out to 1,200 people, an average of £28.80 for each of the 125,000 people who have lost their pensions; that is simply pathetic. Even today, at Prime Minister's Questions, we had the slippery—that is probably the fairest way of putting it—pretence that people under the present arrangements will get 80 per cent of their "core pension", the specious phrase that the Government have invented.
	I was asked on television at lunchtime why we were so worried about the difference between the 80 per cent of pension that people will get under the FAS and the 90 per cent they will get under the Pension Protection Fund. We are worried because the difference is much greater than that. Under the FAS, people will not get 80 per cent of their genuine expected pension; there is no inflation-linking; the scheme starts from the age of 65, whatever the scheme pension age was; there is no tax-free lump sum; there is no ill-health benefit; and widows' benefits are far worse.
	If separate proof is wanted about how much worse the FAS is than the Pension Protection Fund, even under the present arrangement the estimate of the net present cost of giving PPF benefit as opposed to FAS benefit is £2.5 billion as against £1.9 billion. The FAS benefits are something like one-third less, so the figure of 80 per cent that the Government are bandying about is deeply dishonest.
	We never would have got even this far in improving the financial assistance scheme had it not been for a roll of honour of campaigners for justice for these people, led by the indefatigable Dr Ros Altmann and the Pensions Action Group. The media have also been exceptionally effective. I pick out in particular Liam Halligan of Channel 4 and the Sunday Telegraph and Patience Wheatcroft of the Sunday Telegraph. There is no doubt that public pressure has played a great part in getting the Government to move even this far.
	The key point for Liberal Democrats is that the PPF benefits should be guaranteed and the pensioners who have suffered for so long should know that they are going to get them. We talked in our manifesto at the 2005 election of more than 60,000 workers who were affected; that shows how little information there was and how much the figure has increased. We said then:
	"We will bolster the Government's compensation scheme"—
	meaning the PPF, as it then was—
	"to make sure that these workers are compensated at the same level available under the new Pension Protection Fund".
	We were prepared to make a manifesto commitment; that has been our position all along. We would have preferred a straight commitment of that type—we believe that it is affordable. Obviously, we have to co-operate to achieve justice for the 125,000 people. On the basis that the amendments which were very nearly passed, with cross-party support, in the Commons are the only ones that will command support on the Conservative Benches and our own, we are supporting them. We very much hope that they will be agreed to today by a thumping majority which will make the Government think again—long, hard and often, if necessary.
	The High Court, the European Court of Justice, the ombudsman and the Public Administration Committee have stripped away, one by one, the Government's threadbare defences against a charge of maladministration. Now Britain's new Prime Minister—Gordon Brown has been behind this all along—has no more clothes left with which to hide his meanness to these pensioners.

Lord Howarth of Newport: One would have to be stony-hearted not to be moved by the letters we have received and the deeply unhappy individual cases of which we are aware. But I want to be so insensitive as to raise a number of questions of principle and of practice and to ask my noble friend, when he comes to wind up, to comment on them.
	What do the Government consider is the place of the principle of caveat emptor in pensions policy? Clearly, the Opposition do not think that it has a place. But is it not the case that we are looking at the consequence of business failures, of mismanagement of private funds by trustees? Is it not also the case that these unhappy and unfortunate pensioners would have contracted out of SERPS? Where is the line to be drawn between personal and private responsibility and the responsibility of the state? We know that it is the state's bedrock duty to provide social security so that people do not have to eke out an old age in destitution, but on what principle do we judge what more the state ought to do?
	Can any reasonable person have supposed that the state was always going to underwrite the whole of the private pensions system? I think not. Clearly, literature was produced by the department which, unfortunately, gave people the impression that that might be the case. But will my noble friend tell the Committee on whose watch that literature was produced? Who were the Government and the Pensions Minister who let it out? What was the cost of that error, and what is the price tag on the ombudsman's recommendation and the High Court's ruling? How many schools and hospitals could have been paid for with that money?
	The Government have chosen to be generous, and I am glad that they have. I hope that my noble friend will remind those listening to this debate of how many billions of pounds the Government have set aside for the financial assistance scheme, to which the noble Lord, Lord Oakeshott, referred as a "miserable little scheme". The noble Lord, Lord Skelmersdale, gave us some figures, referring to provision of £8 billion over 30 years with a net present value of £1.9 billion, but he clearly thought that that was not enough. How do we establish the appropriate limit for public expenditure, which is after all not an inexhaustible tap with which we can wash away all varieties of misfortune? Do the parties opposite consider that those who have lost their savings and pensions expectations through the collapse of Equitable Life should also be rescued? Who should be brought in? Where do we draw the line? How do we establish some principles in this regard?
	Once upon a time, the Conservative Party understood that there had to be limits to public expenditure, but compassionate Cameronism gushes pound notes like an incontinent geyser. We are accustomed to the fact that the Liberal Democrats spend a penny on income tax and spend it again and again in their fairytale economics, and the Conservative Party used to deride them for that—but now they are "shoulder to shoulder". That I think was the expression that we heard.

Lord Skelmersdale: I think that the noble Lord was here throughout the entirety of Monday, when I got some implied criticism for controverting amendments tabled by all sorts of people—not least the noble Baroness, Lady Hollis—exactly on the point of how much it would cost. Therefore, I do not think that that is a fair charge to level at myself.

Lord Howarth of Newport: The noble Lord seems to be a little selective in his application of these principles. He asked the Committee this afternoon to believe that the lifeboat that the opposition parties are proposing is a credible vessel, because it will be freighted with unclaimed or orphan assets from pension funds. He even said today that the Conservatives would lay their hands on people's premium bonds. Once upon a time, the Conservative Party had some respect for private property.
	The Government's review will look realistically and I trust will report soon on what these orphan assets and unclaimed assets are and whether there is really scope to extract some more beneficial use from them. But in the mean time, I heard the noble Lord, Lord Skelmersdale, calling for immediate payments—so his contention that this lifeboat would not entail more public expenditure is simply incorrect.
	We should recall that if the Conservative Government had not rejected Labour proposals for a central discontinuance fund—a predecessor fund, equivalent to the Pension Protection Fund, in the mid-90s—today there would be no need for the financial assistance scheme. The arguments that the noble Lord put forward about the so-called raid on pensions are also bogus. If he meant to be fair, he should have reminded us that the context of that policy change in 1997 was a restructuring of corporation tax to encourage long-term investment, improve productivity and competitiveness and therefore to improve profitability and the capacity to pay pensions. He might have reminded us that the shift from defined benefit schemes was already well under way by 1997. There were other very important factors that dwarfed the impact of the ACT change: the maturing of pension schemes, growing longevity, forecasting errors by the actuaries, declining interest rates, bad management of schemes, and, above all and on an altogether different scale, the stock market collapse of 2000 which wiped £250 billion from pension fund assets. Set that beside the £5 billion cost per annum of the change to ACT.
	The case that the opposition parties have made on this is disingenuous. It is a politically motivated tactic against the Chancellor. It is posturing and opportunism. It exposes the difference between this Government, who have chosen to be generous within the limits of fiscal responsibility, and the recklessness of the Conservative and Liberal Democrat parties.

Baroness Greengross: I support these amendments and do so simply on the grounds of fairness and justice. It is totally unacceptable arbitrarily to leave out one group of pensioners from the benefits of the Pension Protection Fund as it has now been established. These people had no choice. If they had had a choice, a real choice, that would be different; but they did not. Caveat emptor really does not apply in this case. These people were told that they should join the company pension scheme. They were told that the scheme was sound. They had virtually been guaranteed that it was sound and would look after them when they retired. Maybe that was wrong, but that is what they were told. These pension schemes have now failed them.
	People were given that message when they were still at work. To treat them in this way now is unfair, undemocratic—as the noble Lord, Lord Oakeshott, said—and unjust, as well as being inhuman. It is totally unacceptable and the Government must rectify it. They have a duty to do so. Not that many people are involved. There will be a cost to the public purse but it is not a very high one. The Pension Protection Fund was a very welcome government initiative which rectified a social ill and many of us welcomed it with open arms. It was well done. It is an initiative that these people also must enjoy to the same level. I hope the Government will think again.

Baroness O'Cathain: Following the noble Baroness, Lady Greengross, I am moved, first, to ask for confirmation that the people who went into these schemes did so not on the basis of a recommendation but because it was a condition of employment. Therefore, they had absolutely no option.
	Secondly, many of the problems that arose from this mis-selling of pensions—no, not mis-selling; from this situation—resulted from these companies being taken over by other companies and raids on these pension funds. But the Government have not gone after them. We said to people in employment, "You have to take an occupational pension". However, successive Governments have managed to get away with paying—and I use the term advisedly—a state pension that is a pittance compared with those of other European countries while knowing that occupational pensions were there as a back-up. They probably genuinely thought that there would not be much hardship. However, when things went wrong and these companies were taken over by absolute pirates—another term which I use advisedly; I know some of them, and have discussed them previously with the noble Lord, Lord Oakeshott—nothing was done about it.
	Now we rightly want a lifeboat. These people were forced into occupational pensions and expected a proper income in retirement. They have based all their life choices—where they live, saving for their children's university education and so on—on these pensions, but all of that has vanished like snow in summer. So it is essential that there is a lifeboat. However, I take issue with the funding of the lifeboat. I believe that the Government are responsible for that because of the point that I made. I do not think that the so-called unclaimed assets should be used because there are different types of unclaimed assets. There are unclaimed assets in banking, although I leave those to one side because a case could be made for that. There are also unclaimed assets in insurance companies, which are used to fund people on very low occupational pensions who get the state pension plus a little bit. Why should the Government again use the excuse that those people will get a little bit through these unclaimed assets and say, "Not my problem"? It is their problem. I am not really equipped to give the ins and outs of insurance companies' unclaimed assets, but as a question of social justice and fairness—this is the issue that we are dealing with—there is no excuse for the Government not to find the money. Goodness knows how many billions of pounds of public expenditure are wasted. The Government should take a proper look at public expenditure and fund the lifeboat from it, which would satisfy both situations.

Lord Turnbull: The Conservatives have joined forces with the Liberal Democrats in tabling Amendments Nos. 68 to 73, which propose a lifeboat fund to enable the financial assistance scheme to be made more generous. Under Amendment No. 74 this would be funded through the so-called unclaimed assets of insurance companies. At this stage I retain an open mind on whether the financial assistance scheme should be made more generous. Having notified the Committee of my interest as a director of Prudential plc, I should set out why I think that the proposal to finance this scheme through so-called unclaimed assets is seriously flawed.
	The mental map underlying this is that unclaimed assets in insurance companies represent a windfall source of profits, as they do for banks. As insurance companies are seen as having a dubious legal claim, and even less of a moral claim in this matter, it is argued that as a matter of public policy it is acceptable to take these gains away and use them for more deserving social causes. This is analogous to the principle of bono vacantia arising from people dying intestate. There are several objections to this line of argument. First, it represents a flagrant departure from the principle of evidence-based policy making. The Government have set up a review under Mr Andrew Young to go over all the arguments about the way insolvent pension schemes could be funded, yet these amendments, particularly Amendment No. 74, seek to change the legislation before we have the outcome of that review. That is like introducing the Dangerous Dogs Act without finding out whether dangerous dogs exist.
	Secondly, it is not the case that unclaimed policies with no clear ownership are a windfall gain to insurance companies. In most insurance companies the policies in question are funded through a with-profits fund. By a longstanding convention, perhaps even law, the fund is 90 per cent owned by policy holders collectively and 10 per cent owned by shareholders. The Pru's practice is that if a policy is not claimed 15 years after it has lapsed following the maturity date, or when the policy holder would have reached 105, the amounts unclaimed are credited to an account within the with-profits fund. Then 90 per cent of that is added to the bonuses of the remaining policy holders. If someone subsequently turns up aged 106, they can get their money back. This has been the clear, legitimate expectation of policy holders for many years. Unlike with the banks, there is no vacuum around ownership.
	The third objection concerns equity. The proposed new clause in Amendment No. 74 would remove from existing policy holders a longstanding part of their return and pay it to another group deemed to be suffering hardship. The ABI has described this as robbing Peter to pay Paul. As Robin Hood demonstrated, sometimes that is justified, but for this to have any morality, it should be established that those making the sacrifice, the "Peters", are significantly better off than the "Pauls", who would otherwise be putting up the money—in this case the generality of taxpayers. That test is dramatically failed. The average Pru ordinary branch policy amounts to some £20,000, which might, at current rates, buy an annuity of some £1,200 a year or £23 a week—no more than a quarter of the state pension. Some 3 million such investors are in the Pru's with-profits fund. Even worse, some 1.3 million industrial branch policyholders, dating from the Pru's door-to-door collections, have even smaller policies.
	Let us consider the nub of the issue. The concept of unclaimed assets proposed by the noble Lord, Lord Skelmersdale, is a fiction. These are not bona vacantia where ownership is unknown. There is clear ownership of with-profits funds—90 per cent is owned by the policyholder and 10 per cent by the shareholder. When the state takes away someone's property through legislation, we call it taxation. It is questionable whether it is proper for an amendment, as a proposal to impose such a tax, (a) to be tabled in this House and (b) to be tabled by the Opposition. The other place should seriously consider invoking financial privilege.
	Setting aside the legality, let us look at the morality and the politics. As a way of raising money to pay for greater compensation for those let down by their pension funds, such a proposal is grotesquely inequitable. It would take money from millions of policyholders, many of whom have no occupational pension at all and whose investments would yield an average income of £23 a week—less than one-seventh of what I could claim for making a speech here for 10 minutes. If Parliament decides that it must do more for disappointed pensioners, it must place the burden on some broader backs: taxpayers at large.
	It is a mystery that the opposition Benches, after complaining loudly about pension grabs and stealth taxes, should support a proposal that exposes them to exactly the same charges. It is not too late for them to escape from a proposal that would provide serious political embarrassment for them. The right course is to vote against this group of amendments and allow them to be resubmitted at a later stage, shorn of the offensive new clause in Amendment No. 74.

Baroness Hollis of Heigham: I hope that the Committee will resist these amendments. The present situation has been shaped by two pieces of legislation: the Pensions Acts of 1995 and 2004. In the debates in 1994, the Government of the day introduced the minimum funding requirement. I led for the Opposition on that Bill. All of us knew exactly what MFR meant. It was a funding level that would generate a 50 per cent probability of meeting the pension promise if the company folded. The professional organisations, the trades unions and all of those who lobbied us at the time—and certainly the politicians, led, I believe, by the then Pensions Minister, William Hague, in the other place—knew well what MFR entailed. Precisely because of our worries, which were shared at the time by the Liberal Democrat Benches, including the late Lord Russell and the noble Lord, Lord Goodhart, we tabled an opposition amendment to introduce, as my noble friend mentioned, a central discontinuance fund—a PPF—on the ground that risk pooled is risk reduced.
	Although some of the finest economists in the country, including my noble friends Lord Eatwell, Lord Desai and Lord Peston, spoke to and supported that amendment, and argued for not only its social justice virtues but its economic virtues, we could not persuade the Government to support it. I have to say that in my reading of the ombudsman's report on those debates, I did not fully recognise her account of them. I choose my words with care.
	The problems of MFR were concealed for a few years by rising stock markets, until severe falls from 2000 on, together with statistics about longevity, started a chain of events that led to the PPF in the 2004 legislation. With the genuinely constructive help of noble Lords opposite, to whom I am grateful—I pay tribute in particular to the noble Baroness, Lady Noakes, the noble Lords, Lord Oakeshott, Lord Fowler and Lord Skelmersdale, and, above all, the noble Lord, Lord Higgins—we in this House came up with a scheme, the PPF, which continues to win plaudits. We all recognised that the failure of vision in 1994-95 and the failure to set up a central discontinuance fund had to be made good. We did that co-operatively by a levy on future schemes. The question that we then faced was: what about the schemes that had failed before PPF? I refer in particular to the period since the coming into effect of MFR in the 1995 Act—to those schemes from, say, 1997 onwards.
	No one, but no one, believed—this point was well made by my noble friend Lord Howarth—that because of MFR or a couple of leaflets from the DSS, the Government were now committed to underwriting £900 billion in the occupational pension industry. If people had believed that on the basis of MFR and DWP/DSS leaflets—they did not—no employer would have needed adequately to fund their schemes, no trustee would have worried about what might happen and no trade union would ever have needed to press for better funding. Why would they bother? Talk about moral hazard. Of course they did not believe that, of course they did not act on that as though they had believed it and of course all parties and all players sought in different ways to meet the obligations of their pensions promise. I do not accept, and I do not really believe that anyone in this Chamber accepts, that the Government have any legal responsibility for commercial failure—for companies that failed adequately to fund their schemes. This involved the playing out of a calculated risk that the Government of the day in the 1995 legislation embodied in the MFR by coming up against commercial failure and at the same time refusing to underpin it with our request for a central discontinuance fund.
	If the Government have no legal responsibility, did—or do—they have a moral responsibility? Not really, but they should promote benevolent public policy because people at the time did what we as a society wanted them to do—build a pension. We cannot retrospectively introduce a levy on the industry as though in effect the 1994 central discontinuance fund was in existence and working. The only alternative was to turn to the taxpayer, which involved asking taxpayers, including many low-paid, part-time women who have no occupational pensions at all, to insure the occupational pensions of those who had them—occupational pensions, incidentally, that had already received a substantial taxpayers' contribution through tax relief and a substantial employers' contribution. The contribution of employees in many if not all final salary schemes would be, I guess, about one-third of its final worth.
	Was it right to ask someone earning £10,000 a year without a penny of savings to cross-subsidise someone with earnings of, in some cases, four times that? Would we accept the same principle in the travel industry, so that it had a general levy on each person in the population rather than simply, as with PPF, holidaymakers taking out relevant insurance? It is because of that dilemma that, as a society, we wish to be seen to be supporting people who are doing what we wish them to do—that is, saving—but we must also recognise that in the funding of the scheme some people did not have the opportunities that those in the PPF now have to enjoy the benefit of a forward-looking levy.
	In 2004 we devised FAS. I am the first to admit that we devised it in this House rather than the other place as the Bill went through various stages. Again, the Opposition played a genuinely valuable and constructive role, which I much appreciated, in what were admittedly daunting circumstances. We all shared the common objective—I believe that that is the phrase used by the noble Lord, Lord Oakeshott—but there was some concern about some of the structures involved. It was always intended that FAS would be paid for by some people who had no pensions at all. As a result, the claims should not be paid at the same rate as with the PPF, which was funded by the industry; in other words, at 80 per cent in FAS rather than 90 per cent in PPF. We understood that very clearly in 2004.
	In 2004 it was also understood in our debates that additional money would be made available, but only as the scale of need became clear. What stopped us being able to assess that was dirty data. The bulk of potential claims on FAS came from deferred pensioners—people who had worked for companies for three or five years and had since moved on once, twice or three times. Employers and trustees may have weak or incomplete records of contributions, age profiles, length of stay and so on; some companies—for example, asbestos-related companies—may have changed hands several times. The dirty data problem means that it has taken longer than anyone would wish to get the flow of payments going. I was taken aback, when meeting some of the companies and trade unions involved at the time, by how little responsible individuals associated with their companies knew about their pensioner profiles and what the implications would be for FAS.
	It was always understood that the precise structural links between FAS and PPF would be revisited at a later date; at one stage I even suggested that that might be seven or 10 years down the line. That additional money has been forthcoming from the Treasury, which I am delighted about. I firmly believe that the Government's approach is the right and decent one. Of course it would be nice if FAS could be made financially more generous still, but only if we are willing to ask those without pensions to finance that generosity. Of course we want the Government to move faster on pension payouts but, believe me, it is not the professional Civil Service that is being incompetent; the problem is due to the unbelievably amateur record-keeping of some of the companies and trustees involved.
	Finally, as DB schemes close, DC schemes will cover more pension arrangements, including personal accounts. Is anyone today suggesting that if the Government encouraged people into personal accounts, as we will, with an opt-out arrangement rather than opt in, as we will, they will have some legal or moral obligation to guarantee those investments—investments in and disinvestments out—to insure against the risks of inflation, annuity rates or projected longevity rates? I think not. What security, as my noble friends said, are we willing to offer Equitable Life policyholders? Pensions are volatile. Final salary schemes carry a risk associated with the viability of the company and the PPF now will pool the risk on that. DC schemes—money-purchase schemes—carry a much greater risk of full exposure to the markets, and we are doing nothing at all about that. I am not persuaded—I feel even more strongly, having listened to the noble Lord, Lord Turnbull—that there were genuinely freebie assets out there; I refer to assets that are corralled to improve the conditions of FAS. The ABI, the noble Lord, Lord Turnbull, and pension professionals have poured cold water on that. Those assets are already built into the cash flow of major companies. For those in DC schemes, an 80 per cent guarantee of core pension, which is what FAS offers, must look pretty enviable.
	I understand that there is a review of unclaimed assets in lieu, which should report in July. If there are any such unclaimed assets, or if the industry voluntarily wishes to contribute to FAS, as the 2004 legislation made clear it should be encouraged to do, that would be fine. But, in practice, a lifeboat scheme would turn out to be a government loan, interest free, without, I suspect, much possibility of repayment—in other words, a covert taxpayers' additional contribution to FAS. That is what is being proposed here, and we should face up to that. I am not persuaded, in all the circumstances that I have outlined, that it would be right, fair or proper for all the parties concerned to go down that path. I shall therefore oppose the amendments.

Lord James of Blackheath: Provided that I am in order, I wish to speak to Amendment No. 69 in this group. It performs the essential and important function of removing the necessity for an employing company to be in a state of bankruptcy before it can transfer into the lifeboat fund. I declare an interest in that I speak from practical experience of this situation, having been chairman of a company that passed through this process, but that is all resolved and there are no outstanding issues relating to this matter.
	There was once a British company listed on the London Stock Exchange that had traded successfully for a great many years until it was tempted to make a very large investment in purchasing a series of parallel manufacturing businesses in the US, for which purpose it borrowed $1 billion. That venture did not prosper and, very rapidly, the group's consolidated position was one of borderline insolvency. The American bankers were consulted separately from the British ones and agreed to write off $400 million and inject an additional $200 million to sustain the American business, provided that they were allowed to have unencumbered ownership of those assets. Separate pension schemes had applied to both the US and British arms, and at that time the British pension scheme was in deficit by £96 million.
	Members of the Committee will rapidly have understood the problem. If the Americans were to put in $200 million of new capital, it would have to pass through the parent company in London and that money might have been attacked by the pension trustees in Britain with a view to filling the £96 million hole. The Americans did not think that that was very funny, so they decided that they should make certain conditions. They offered the British pension scheme a £10 million contribution to their deficit and 10 per cent of the equity of the new company which they would create in America.
	The pension trustees were initially happy to do that. We reached the point when the whole deal was to come out of escrow and be signed at nine o'clock the next morning. Incidentally, I should add that this happened to be the first day of the only honeymoon of my life, which made for very interesting proceedings.

A noble Lord: Is the noble Lord still married?

Lord James of Blackheath: Yes, I am, and I express my appreciation to the Government for what I can describe only as a character-building experience for my wife and me. By dawn, at seven o'clock the next morning when we had resolved the matter, my wife was convinced that she had married into a madhouse, and, indeed, she had in terms of what the law was bringing about.
	During that last night, the trustees lost their nerve in relation to the British pension scheme because the pension beneficiaries of the British company threatened to take proceedings against the trustees personally if they did not succeed in getting the company into the lifeboat, which they could do only by bankrupting the British company. So, by insisting on the bankruptcy of the British company, they lost the benefit of some 1,500 jobs and the potential value to our economy of any future recovery that that company might have produced. Therefore, there was a complete distortion of the priorities that should have flowed from the decision processes forced through by this action.
	Amendment No. 69 would remove that problem so that it could never occur again. I am sure that there will be many variations of it but the demands that it imposes on trustees are too unpredictable and completely irresponsible. Therefore, I wholly support the amendment.

Baroness Howe of Idlicote: I support the amendment along the lines of the views expressed by my noble friend Lady Greengross. We are all upset to know that this group of people has been severely disadvantaged. I know that many Pension Acts have been passed since I was on the board of Legal & General. I also sat on its pension fund and often asked why the company was taking a pension holiday. Now there are incentives for companies to do that in good times, and I am told that there might even have been penalties if the company had not done so.
	Anyone who reads the letters that have been sent to noble Lords on this subject will feel a sense of responsibility. It may be that none of the proposals in the amendments provides the perfect method for making appropriate compensation, and perhaps the answer is that such compensation should come from all the groups that have been mentioned, including those of us who will also lose out on our pensions in due course. Hundreds of letters have been received and they have all been individually written. They are not the sort of letters that one puts straight into the waste paper basket—the type of letter which someone writes out for you and which you send on. These are heartfelt letters from people who had imagined that they would have a reasonable retirement with not huge sums of money but enough to live on. The letter that upset me most was from a woman who felt that she had to lie to her husband on his deathbed by saying that she would be all right. She said that she had never lied to him in her life and feels sad that she had done so, but she lied so that he could die feeling that everything would be all right for her.
	We must find some way of doing the right thing by this group of people. It cannot be right that they are getting only 60 per cent of what was promised to them. The situation has been going on for a long time and many of them have died in the mean time. These may not be the right amendments but they convey the general feeling. At one stage, under the previous Government, we were all encouraged to move out of the state system and into the private sector, and a lot of the people whom we are talking about today became victims as a result of that. They were told that what they were doing would be more beneficial to them in the long run. However, things have not turned out that way, so I hope that we will think again.

Baroness Turner of Camden: I have some difficulty with this series of amendments. First, I have considerable sympathy for the people who have written to me, as they have to all noble Lords, about their situation concerning the FAS and so on. However, I point out to my noble friends who have queried whether the Government have any responsibility that I think that there is a moral responsibility.
	We have to remember that our pension system in this country, even from the time of the Castle scheme, has been built on the basis of a partnership between state and private provision. That was specifically stated in relation to the Castle scheme and, rightly, successive Governments have encouraged occupational pension schemes. Therefore, in that respect, we have some responsibility for failures in our part of the partnership. I remind my noble friend Lady Hollis that, when the MFR was introduced, some of us pointed out that it would give people a false sense of security because it would not provide the security that people imagined it would.
	So far as concerns the present situation with the FAS and so on, as I said, I have considerable sympathy with the idea of a lifeboat fund. My only concern relates to the way in which it is proposed that it should be funded. I draw attention to the article by my right honourable friend Frank Field in the current Pensions Weekly. He supports the idea of a lifeboat fund but says that it is very important that the right sort of amendment is carried in this House. He is very much against any possibility of trying to use unclaimed pension assets. He points out that that is not at all reasonable: pensions are held in trust and therefore there is no possibility of claiming any assets in that regard. However, he does not say that there is any objection to using unclaimed moneys in banks and building societies and says that that is a possibility.
	I certainly believe that there is a strong case for dealing with this fairly immediately, because making people wait for a review will cause further agitation and lobbying. That is a problem. I agree with the idea of a lifeboat fund but I am not at all happy about these proposals for funding it.

Lord McKenzie of Luton: The Government have great sympathy with all pensioners who lost out in very unfortunate circumstances. That is why we are committing some £8 billion of taxpayers' money to seek to address the issue. The noble Baroness, Lady Howe, referred to correspondence that she has received. It is incumbent on us all to think of those situations when we address this problem.
	Having said that, I think that it is a bit rich of the noble Lord, Lord Skelmersdale, to try to get political capital out of the issue. The Conservative Party was criticised by the ombudsman. The ombudsman's report spanned 10 years from 1995, when the Tories introduced the minimum funding requirement, to which my noble friend Lady Hollis referred, in the Pensions Act 1995, in the wake of the Maxwell pensions scandal. Of course, William Hague, who is now shadow Foreign Secretary, was the Pensions Minister dealing with that matter. We should put these party-political scoring points behind us so that we can address the issue seriously.

Lord Skelmersdale: The Minister does not exactly encourage me to do that. I remind him that this Government have been in power for 10 years and even up to 2004 they had had plenty of time to deal with the situation.

Lord McKenzie of Luton: This Government introduced FAS, which introduced the PPF. There was nothing near it under the previous Government. Our record in helping pensioners is far superior to theirs. We have lifted 1 million pensioners out of relative poverty since we have been in office, which puts the previous Administration's record to shame.
	These amendments appear to me to cover three issues. First, many of them represent a potential call on the public purse well in excess of the £8 billion already committed by the Government. The noble Lord, Lord Skelmersdale, asked me about the £8 billion; he is right to say that it has a net present value of £1.9 billion. The cost of the proposals that he supports, in cash terms, would be in excess of £10 billion, and there is an extra net present value associated with that of £640 million, which I believe is effectively a public expenditure commitment.
	Secondly, many of the amendments would replicate work that the Government are already undertaking to ascertain whether funding can be found from non-public expenditure. Thirdly, none of them would mean more money for more members immediately. Indeed, their effect might very well be to slow down payments for members, which I know is not the intention of the supporters of the amendments.
	The noble Lord, Lord Oakeshott, said that we are ignoring the findings of the ombudsman's report. He will be well aware that we placed a detailed response to the report before Parliament in June of last year and that in November we published our response to the report of the Public Administration Select Committee on the same issues.
	I also remind the Committee—I believe that the noble Lords, Lord Oakeshott and Lord Skelmersdale, referred to the High Court—that the High Court upheld the DWP's decision to reject the ombudsman's finding of maladministration in respect of a change made to the minimum funding requirement in 2002 and it upheld the DWP's decision to reject the ombudsman's conclusions that the maladministration identified led to the losses incurred by all members of the schemes that went into wind-up between 1997 and 2004.
	Amendment No. 68 would transfer responsibility for managing FAS from the Secretary of State for Work and Pensions to the board of the Pensions Protection Fund. That gives me an opportunity to talk about the substantial work that FAS is, and has been, doing and to explain why transferring responsibility for the scheme to the PPF would not, in fact, be in the best interests of members. I know that some noble Lords remain convinced that the PPF could run the FAS better than it is run under the current arrangements. Let me remind the Committee that the review of FAS administration carried out at the Government's behest last year did not agree. That review, which benefited from input from the PPF, concluded that, while lessons could be, and have been, learnt from the PPF's approach to proactive data gathering, there are significant constraints on its ability to manage FAS operations. I see no reason at this point to revisit that conclusion. I do not rule out looking at this again should the review of pension scheme assets identify a different approach to funding FAS, but I do not think that it is sensible to pre-empt those findings.
	Perhaps at this juncture I could update the Committee on what is happening. In most cases, FAS money is not paid until a member reaches 65. That means that there are not 125,000 people waiting to be paid at this moment. We estimate that there are around 10,000 individuals who are over 65 and should qualify for payments under the current scheme rules, but the Operational Unit has already carried out assessments on around 4,100 people: of those, 1,624 are eligible for payments of FAS; 1,236 are being paid now; 68 will be paid as soon as the members have confirmed their personal details; and 320 will be paid as soon as they reach 65. There are 2,482 who are currently ineligible because of the de minimis £520 a year constraint and other factors such as the relatively high funding level of their scheme. The legislation requires applications made by trustees, as only they can provide the data that are needed to assess payments.
	One factor limiting payments is relatively high levels of scheme funding; for example, schemes are able to make payments higher than the FAS initial payment level of 60 per cent. However, the Bill raises the level to which FAS will top up any interim pension being paid by a scheme that is still winding up from 60 per cent to 80 per cent. That will enable us to provide assistance with immediate effect from Royal Assent to hundreds more people who currently receive 60 per cent from their pension scheme.
	Other factors may prevent trustees from making applications and providing us with the data that we need to make payments, but some will have worked out that their members will not receive FAS due to the de minimis level of pension already in payment and so have chosen not to apply for payments on their behalf. We expect that to change once the FAS rules are amended to benefit such cases, as I have outlined. Other trustees will be close to completing wind-up and so will be reluctant to supply data for initial payments when they will have to submit final data for annual payments a short time later. Others are anxious to await the outcome of a current court case—the Dubery case—which will impact on how they treat their members, and do not wish to provide us with data that may turn out to be incorrect and lead to overpayments.
	While those are legitimate reasons for caution, they are delaying people receiving help, so we are working with trustees and administrators to help to resolve those issues. I can truthfully say that we are paying all those members for whom appropriate data have been provided and will continue to do so, but we are conscious that it is individual members who suffer if they are due to receive money at 65 and, for whatever reason, are not getting it. I can announce today that we are introducing arrangements so that, rather than relying on trustees to make applications on their behalf, individual scheme members who believe that they are eligible for payment can advise the FAS Operational Unit direct, which will then contact the scheme trustees to seek to arrange a payment. I shall shortly be writing to all noble Lords to explain the new arrangements. The Government will be seeking help from campaigners and trade unions to ensure that everyone eligible for assistance receives it as quickly as possible.

Lord Oakeshott of Seagrove Bay: Given the appalling delays we have had for all these years, why has it taken so long for the Government to take this absolutely simple step?

Lord McKenzie of Luton: I have tried to outline the difficulties in getting payment through the system more quickly. My noble friend Lady Hollis touched on issues of data. We have had to rely on trustees. We will still have to rely on trustees, but we are creating this extra avenue of approach to try to speed things along. I hope that the noble Lord will support that.
	The effective use of taxpayers' money to revisit the operation of FAS will undo the very real efforts made by the FAS Operational Unit to improve performance since its inception and since the review of administration. We have invested in training for staff, working with a leading provider of services to the pensions industry to ensure our people are able to deal with the complexities of the schemes with which they come into contact.
	I will identify briefly the sort of cases that the FAS Operational Unit deals with on a daily basis. This demonstrates the difficulties of dealing with the sorts of pension scheme that qualify for FAS, which are very different challenges from those facing the PPF. It also demonstrates the commitment and determination of FAS staff to secure the best possible outcomes for members. I will not name the pension scheme in question but it began to wind up with 24 members in 2001. Only eight pensioner members received payments from the scheme at first, and these ceased in 2002. Since then no payments have been made to any scheme members. It having been accepted as a qualifying scheme for FAS, we requested the scheme records to assess FAS eligibility and payments, only to be told that most of the member records had been lost. The records that did exist were insufficient to determine payments.
	Since then, FAS staff have worked to trace the whereabouts of members and to piece together the data they need. This has involved contacting known members, former administrators and actuaries, the Pensions Regulator, HMRC, and other parts of DWP. Not all those avenues would be readily available if FAS were administered outwith the department. Most of the scheme members had given up hope of seeing their scheme pension. In many cases they were not even aware that their scheme had been submitted to FAS for consideration. To date, we have awarded payments ranging from around £1,000 to £4,000 per annum, with arrears of up to £8,500. This is making a real difference to people who had given up hope and it is a testament to the dedication and skills of FAS staff.
	There is no evidence that the PPF, which, let us remember, has no experience of dealing with schemes that have long since wound up or where records are hopelessly outdated or even non-existent, would prove more capable of dealing with these problems. The PPF is finding that even the task of dealing with pension schemes newly entering the assessment period is more resource-intensive than anticipated. We are working to share the lessons across FAS and the PPF. We continue to strive to improve our processes.
	Amendment No. 69 removes the provisions of the FAS regulations relating to employer insolvency event qualification conditions. The purpose of this amendment appears to be to ensure that schemes, and therefore their members, are not excluded from the FAS solely on the basis that their employer is solvent. In its fifth report, published on 10 May, the Public Administration Select Committee asked us to look into this issue. I shall explain how we are doing so.
	We have great sympathy for any member of a defined benefit scheme faced with the loss of their pension through no fault of their own. However, in developing FAS to provide help for such people, we have been careful to ensure that taxpayers' money is not used to provide assistance for pensions that could and should be funded by relevant employers. We believe that even where employers have no further legal obligation to fund their scheme, there remains a moral obligation that should be followed. In its report, the PASC sympathises with this aim, saying it understands,
	"the Government's unease that the taxpayer is having to provide pensions which were promised by employers and should be honoured by those employers".
	We aim to ensure that all members of relevant schemes receive at least 80 per cent of their expected core pension, subject to the cap, wherever employers are unable to fulfil their pension promise. That is why the definition of "employer insolvency" for FAS purposes is designed to be sufficiently general to capture schemes where the sponsoring employer no longer exists and where insolvency may have occurred some time after scheme wind-up had started. We continue to look closely at schemes that are excluded even under this generous definition, which is why we announced on Report in another place that we will extend the FAS to cover members of schemes that began winding up between 1 January 1997 and 5 April 2005 where a compromise agreement is in place and when enforcing the debt against the employer would have forced the employer into insolvency.
	The noble Lord, Lord Skelmersdale, asked how quickly we would be able to come forward in that. We intend to include such schemes in regulations to bring about the extension of FAS announced in the Budget, and hope that this will come into force by the end of this year.
	Despite these changes—and I think this is the point touched on by the noble Lord, Lord James—we are aware that there may be some schemes not covered by this proposal in which members may face a comparable loss to their pension in similar circumstances. Therefore, we have asked the review into pension scheme assets to consider representations on behalf of members of such schemes. It would not be right to provide assurances that all schemes, irrespective of their solvency position, should be able to qualify for the FAS now before the review presents its findings. For example, some of these schemes will still be winding up and hoping to bring pressure to bear on employers to make contributions to the fund. If the Government indicate that their members are likely to be helped via FAS, there would be little incentive for trustees to rigorously pursue such cases or for employers to respond sympathetically. It would not be right to ask the taxpayer to bear the price of this amendment without careful consideration of this risk.
	The next amendment calls for supplementary payments at PPF levels to be made to FAS recipients. The Opposition attempted to float their lifeboat fund in another place and, if I may say so, it remains as full of holes now as it was then—a leaky vessel, in which I could not encourage scheme members to place their trust.
	Of course, the Government sympathise with the aim of getting more money to people who have lost their pension. We have committed £8 billion of taxpayers' money to the financial assistance scheme and have set up a review, led and advised by experts, to investigate whether additional funding can realistically—I stress "realistically"—be found. What we will not do is to make rash promises to members which might very easily result in yet more public money being spent on assistance.
	The amendment would require the Secretary of State to make loans to the lifeboat fund so that it could top up pension and FAS payments. Without a guarantee that there are sufficient funds within unclaimed assets to cover these loans, this amounts to nothing more than an open-ended spending commitment. The noble Baroness, Lady O'Cathain, was very happy with that proposition. She did not want to dip into lifeboat-fund assets, as I understand it, and was quite happy to support public expenditure funding this increase. I wonder therefore whether she will desist from voting with her colleagues who propose another solution today. Given that the loans are interest-free, there is an element of public spending even if they are eventually repaid.
	Even without the question of funding, the issues are complex. A commitment to a process and structure that has been cobbled together without proper consideration of the legal and administrative difficulties, however well intentioned, could very possibly simply make things worse. The amendment fails in its aim of getting money to members more quickly. As envisaged by the Opposition, the lifeboat fund will top up actual pensions and FAS. This means that members could conceivably receive income via three separate streams and from three different agencies—their scheme pension, FAS and the lifeboat top-up. That is a recipe for confusion and delay.
	The Government have pledged, if the assets review concludes that it is workable, to raise assistance levels towards 90 per cent. We are providing more money for more people immediately through changes to initial payment levels in Clause 18. Unlike the lifeboat fund, those are real commitments on the basis of evidence and backed up by action.
	I now turn to Amendment No. 71, especially its proposed new subsection (6), and Amendments Nos. 73 and 74. These amendments make provision for yet another institution in the pensions protection arena to be funded by the taxpayer. I consider that setting up a pensions unclaimed assets recovery agency exemplifies precisely the sort of waste to which the noble Baroness, Lady O'Cathain, referred on Second Reading and again this afternoon.
	The functions of the agency are to obtain information about such classes of unclaimed assets as may be prescribed by the Secretary of State, to provide the Secretary of State with information on those assets and to administer a scheme for the transfer of those assets. Significant progress has already been made on those objectives, without the need for all the rigmarole and expense that would inevitably surround the launch of a new government agency.
	At this juncture, I make the Committee aware that a meeting has been arranged with Andy Young, who is leading the review. We heard today that we have fixed it for 20 June at 5.15 pm in Committee Room 3A. I will write to noble Lords who may want to come along to see what progress is being made. The review of pension scheme assets announced by the Secretary of State for Work and Pensions on 28 March has already started work. By the end of summer, it will provide the Secretary of State with initial findings. It will provide a full report on the availability of assets within relevant failed pension schemes and what might be done with them by the end of the year.
	We may reflect on what the so-called orphan assets are that seem to be floating around on which the Conservatives and Liberal Democrats base their claim to change the FAS scheme provided for in Clause 18. We have heard from the noble Lord, Lord Turnbull, about the issue of assets of long-term with-profits funds of life companies. As he rightly said, they are not free assets. I ask the noble Lord, Lord Skelmersdale, whether he sees assets of that nature as being fair game for the agency that he seeks to establish. Are those assets that he believes can be garnered to support his proposed scheme, or does he accept that those assets are not available and not free?
	On banking assets, is the noble Lord saying that we should revisit the proposition already advanced and consulted on that unclaimed banking assets should be made available for community use, especially youth projects? Is part of his proposition to redirect some of those funds? Is he saying that there are free assets in defined benefit occupational schemes written under trust? We are entitled to know, because that goes to the heart of whether his amendment is real or a fiction.
	The Government are fully engaged in exploring the potential of unclaimed assets within relevant failed pension schemes. We will, if it would make a real difference to members and not present an unacceptable risk to the taxpayer, use them to supplement FAS payments. It is not sensible to pre-empt the findings of the review, it is not desirable to set up an organisation paralleling the core business of the review, and it is not fair to further raise the expectations of members about the level of assets that might be out there.
	Amendment No. 75 would provide that the Secretary of State must make regulations that prevent trustees of FAS qualifying schemes from the purchase of annuities for nine months from 18 April 2007. We have some sympathy with the thinking behind this amendment, which is why we have asked the review that we announced to look specifically at the use of assets which remain in failed pension schemes. We do not think it is sensible to anticipate the findings of the review, or to compel trustees to action which might not be in the best interests of their members or the taxpayer.
	We believe that annuity purchase provides some flexibility over the nature of the benefits that are secured for members. For example, annuities might be secured that provide certain guarantees in the event of the member's death. It might not be appropriate to deny individual members such flexibility before we can establish that halting annuitisation would bring greater benefits across the FAS membership as a whole.
	Furthermore, halting annuitisation might also mean that the payment of pensions to affected members is delayed. Most qualifying schemes will contain some members who stand to receive an annuity that will cover the full pension that they were expecting. Some of those members may already have reached their normal retirement age. Would it make sense to stop annuity purchase for those members now?
	The amendment puts annuity purchase on hold only for nine months. It is not clear what would happen after that. If annuitisation were to restart from that point, annuity rates may well have gone down. The resulting extra cost of the annuity would be borne either by the member, in losing some of his pension, or by the taxpayer, in providing a higher amount of FAS top-up. Those are complex and delicately balanced issues that need to be carefully considered, which is why we have asked the review to look at these points.
	In the Statement made on 28 March, the Secretary of State said that it continues to be important to the interests of all members of affected pension schemes that schemes are wound up as quickly as possible. We encourage trustees to continue with the administrative processes of wind-up including data cleansing, pursuing employer debt, liaising with the National Insurance Services to Pensions Industry organisation and allocating asset shares to members.
	Trustees must of course take decisions in the best interest of their members but they should bear in mind the deliberations of the assets review. I take this opportunity to encourage trustees to co-operate with the review team in its investigations. I also assure the Committee of our aim that, should the review identify an alternative way of using assets in failed pension schemes, scheme members should not lose out because their pension scheme has completed the wind-up process.
	Given our commitment to look at the issue of annuitisation by way of the review, the perils of halting annuitisation without proper consideration of the risks, and our aim to ensure that members of schemes that annuitise will not lose out, I ask the noble Lord to withdraw the amendment.
	Amendment No. 76 deals with on-account payments. The amendments that noble Lords have proposed to the Bill on the FAS testify that there is divided opinion on the level of assistance that should be provided to affected members and, more especially, the means of funding that assistance. However, I think that we are all agreed that affected members should receive payments as soon as possible. New Clause 18(10) appears to have that intention at its root. However, I fear that the amendment will not achieve that aim and could in fact have the opposite effect of threatening the timely delivery of assistance to qualifying members. The amendment is intended to shift responsibility for the delivery of payments from the FAS operational unit to pension schemes and allows funds for those payments to be provided by FAS or the lifeboat fund, whether by loan or by retrospective repayment.
	The problem with the amendment is that pension scheme administrators would need to learn a new set of procedures to make such payments. That could cause significant delays. It is surely better to use the expertise that already exists in the FAS operational unit rather than to reinvent the wheel and require scheme administrators to learn new skills from scratch.
	The amendment would mean asking hundreds of scheme administrators to learn skills already developed elsewhere. Those administrators would expect to be paid for doing so, further depleting the value of scheme assets available to members. That in turn would eventually mean higher top-up payments, the cost of which would ultimately be borne by the taxpayer. It would not even do away with the need for FAS, as many of the pension schemes which fall within the remit of the scheme have already wound-up and have no trustees to administer the sort of scheme envisaged here.
	The amendment's rationale for funding on-account payments by means of loans or repayments from FAS resources is also opaque. To apply for such loans, schemes would presumably have to assess whether on-account payments were affordable, given their funding position, and would presumably have to make loan applications if they were not. There might be some logic to this approach if significant numbers of a scheme's membership did not stand to benefit from the FAS. It might then be important to ensure that assets of schemes were not being used to make payments to members that might cause younger members' benefits to be cut; but given our commitment to guarantee that all members will receive at least 80 per cent of their expected core pension, this part of the amendment seems to be particularly unnecessary, as well as burdensome. The expertise for delivering FAS payments quickly lies with the FAS Operational Unit. Currently, where data are received from trustees, FAS payments are assessed within a month. This amendment would be likely to decelerate payments and at some cost.
	On Amendment No. 79, tabled by the noble Lords, Lord Oakeshott and Lord Kirkwood, I note that the consensus between the Conservatives and Liberal Democrats appears to break down here, although I believe the noble Baroness, Lady O'Cathain, is with the Liberal Democrats on this one. I assume that the lack of consensus is because this amendment puts upfront an extra public spending commitment. It calls for FAS assistance to be raised to PPF levels and to be paid for, presumably, from public funds. I have every sympathy with the intention, but the laudable aim of raising FAS benefits needs to be balanced against the considerable cost of doing so. We have made very clear our plans to raise the cap to broadly PPF levels and to abolish the current de minimis rule; so the noble Lords' intention to modify the FAS to bring payments up to PPF levels in essence means the FAS providing a top-up to 90 per cent for non-pensioner members, along with some limited indexation.
	We estimate that this change would cost the taxpayer an additional £2.7 billion, or £640 million at net present value, which is a third more than the scheme that we are currently proposing. We believe that current FAS benefits, at 80 per cent, are the most that the taxpayer can reasonably be expected to bear. However, our rejection of PPF-level benefits is not simply on the grounds of cost. There are important differences between the principles of the FAS and the PPF, which should be maintained. The PPF is a compensation scheme, funded by a levy on schemes that seeks to provide protection for pensions in the future. In effect, some scheme members benefiting from PPF payments have paid an insurance premium, from which they benefit on employer insolvency. This premium increases the net cost of providing pensions, hence the employment costs of the employers of these scheme members. There is no public money in the PPF compared with the £1.9 billion of public money in the FAS.
	The Government do, however, agree with the noble Lords' aim of getting more money to people who have lost their pension. We have set up a review into pension scheme assets to consider precisely whether that aim can be achieved through better use of the funds held by qualifying schemes. We have said that the review will present its initial findings in July. It appears that the amendment might not actually meet its apparent purpose. It would require the Secretary of State to make regulations to ensure that payments made to people by the FAS will equal the amount that would be payable if that person were entitled to compensation under the PPF. It does not take account of an essential difference between FAS payments and PPF payments. Given the Government's aim to increase FAS levels of payments through the review of pension scheme assets, and the increased public spending commitment that this amendment would entail, part of which would be unintended, I will urge the noble Lords not to press their amendment.
	These are serious issues; we are dealing with the pensions of thousands of people. My noble friend Lord Howarth asked about caveat emptor. It is absolutely right that we are dealing here with schemes that are not government schemes, where government trustees are not involved and where the Government did not set the investment policy of the schemes. My noble friend Lady Hollis put it very well when she said that the Government have no legal responsibility. We do, however, have a responsibility to promote benevolent public policy. The noble Baroness, Lady Greengross, said that it was wrong to leave one group out but, as I have tried to explain, there is a difference between the FAS and the PPF. Before 1997, neither of these two schemes existed. If people lost out on their pensions, they simply lost out. I remind noble Lords that the High Court found that there was no causal connection between maladministration and the losses of employees.
	I will not range over issues of repayable tax credits; my noble friend Lord Howarth has dealt with those. The noble Lord, Lord Skelmersdale, made some points about survivors' benefits. I should properly write to him about those. The noble Lord, Lord Oakeshott, made a point about the 80 per cent expected core pension and the differences that arise from that. These are serious matters, as I said. The Government have gone a long way to address what is a real difficulty for thousands of our fellow citizens. We believe that we have drawn the line in an entirely reasonable place and that it is as much as the taxpayer should bear. We are looking further to see if other use can be made of other assets, but we will not mislead people into thinking that there is a pot of gold out there and will not make commitments against that until we know the assets are there. On that basis, I ask the noble Lord, Lord Skelmersdale, to withdraw his amendment.

Lord Skelmersdale: I am grateful to all Members of the Committee who have spoken in this debate. Many of your Lordships, in particular the Minister and the noble Lords, Lord Oakeshott and Lord Howarth, have spoken of the dire straits for the 125,000 pensioners who, to quote the Minister,
	"through no fault of their own",
	have seen their pension savings disappear. That is why the FAS was set up. The noble Baroness, Lady Hollis, reminded us of this, but I should remind her that we are where we are now—not then. This Government have had to be pushed every time and every inch of the way on improving the FAS.
	This group of amendments amounts to another improvement, which is quite a large improvement none the less. However, for the vast majority of these pensioners the money is too little, too late. It is too little because of the amount of the "core pension", as we have heard it described many times in this debate, and too late because, unlike the PPF, it is paid only from the state retirement age of 65. Some of these pensioners will die before the money comes through. Others are sick and disabled. The inadequacies of the FAS have been well aired in this debate, which is exactly why we put down these amendments.
	I was criticised by the noble Lord, Lord Howarth, for resorting to government spending. I remind your Lordships that this money will be repaid well before the government spending review period. Two main arguments have been put up against these amendments, not least by my noble friend Lady O'Cathain. Yes, the knife from behind is usually the sharpest, as the Minister will know. But I would remind my noble friend that the White Paper says that 75 per cent of private sector employees have no pension scheme. Therefore, it cannot be a condition of employment.
	The first charge that has been levied is that the lifeboat scheme is robbing Peter to pay Paul. There are no Peters. The unclaimed assets that we are saying should be used do not come from mutual funds. They come from non-trust schemes. If anyone subsequently appears to claim the money that has gone into the scheme, they will have it repaid. So I say again, there are no Peters. The second charge is that there is no money anyway, which is not so, as I said earlier. The Unclaimed Assets Register to which insurance firms and large pension firms belong has identified £15.3 billion of such assets, £3 billion of which are attributable to pension funds. The noble Lord, Lord Turnbull, very properly declared his interest in Prudential plc. I note that that firm is a member of the Unclaimed Assets Register, so I found some of his remarks curious, to say the least.
	Lastly, the Government intend to extend the FAS to those people who have lost their pension because their scheme was underfunded and whose employer was still solvent but no compromise agreement was reached. They will do this by order after this Bill is passed, but not until the end of the year. Amendment No. 69 does this now because now is when the lifeboat fund is needed for these impecunious pensioners. I wish to test the opinion of the Committee.

On Question, Whether the said amendment (No. 68) shall be agreed to?
	Their Lordships divided: Contents, 181; Not-Contents, 126.

Resolved in the affirmative, and amendment agreed to accordingly.

Lord Skelmersdale: moved Amendments Nos. 69 to 76:
	After Clause 18, insert the following new Clause—
	"Financial assistance scheme: qualifying pension schemes
	(1) The Financial Assistance Scheme Regulations 2005 (S.I. 2005/1986) are amended as follows.
	(2) In regulation 9, sub-paragraph (1)(c) is omitted.
	(3) Regulations 11 to 13 are omitted."
	After Clause 18, insert the following new Clause—
	"Pension Protection Lifeboat Fund
	(1) There shall be established as soon as reasonably practicable a Pension Protection Lifeboat Fund ("the Lifeboat Fund") which shall be administered by the Board of the Pension Protection Fund ("the Board").
	(2) The purpose of the Lifeboat Fund shall be to make supplementary payments to persons who are qualifying members of qualifying schemes as defined by the Financial Assistance Scheme Regulations 2005 (S.I. 2006/1986) (or who would be qualifying members if the qualifying age for the Financial Assistance Scheme were set at the level of the qualifying scheme retirement age), in addition to the sums payable in any event under those regulations.
	(3) The supplementary payments made to any person in accordance with subsection (2) shall equal the amount that, taken together with any amounts payable to that person under the Financial Assistance Scheme and amounts payable to that person as scheme benefits under the qualifying pension scheme in respect of which he is a qualifying member of the Financial Assistance Scheme (or would be a qualifying member if the qualifying age for the Financial Assistance Scheme were set at the level of the qualifying scheme retirement age), is the amount that would be payable to that person if that qualifying pension scheme were accepted into the Pension Protection Fund.
	(4) The Secretary of State shall make such loans to the Lifeboat Fund as are necessary to allow the discharge of its functions and in particular its obligation to make supplementary payments under subsection (2).
	(5) The Secretary of State shall make such loans from time to time having regard to—
	(a) requests for such loans received from the Board;(b) the amount of assets transferred or to be transferred to the Lifeboat Fund under the Scheme (as defined in section (Transfer of unclaimed assets) ("the Scheme"));(c) the level of any claims on the Lifeboat Fund in respect of assets transferred to it under the Scheme.
	(6) Loans made in accordance with this section must be repaid to the Secretary of State as soon as, in the reasonable opinion of the Board, it is prudent to do so having regard to—
	(a) the obligations of the Lifeboat Fund;(b) the amount of assets transferred or to be transferred to the Lifeboat Fund under the Scheme; and(c) the level of claims on the Lifeboat Fund in respect of assets transferred to it under the Scheme.
	(7) Loans made under this section shall be interest free.
	(8) The assets of the Lifeboat Fund shall be held separately from the assets of any other fund under the control of the Board.
	(9) The Secretary of State may by regulations make further provision in connection with the Lifeboat Fund.
	(10) A statutory instrument containing regulations under this section is subject to annulment in pursuance of a resolution of either House of Parliament."
	After Clause 18, insert the following new Clause—
	"Pensions Unclaimed Assets Recovery Agency
	(1) There shall be a body called the Pensions Unclaimed Assets Recovery Agency ("the Agency").
	(2) The Agency must be established no later than three months after the passing of this Act.
	(3) The Agency shall consist of not fewer than six nor more than twelve members to be appointed by the Secretary of State, and the Secretary of State shall appoint one member to be the chairman, and another member to be a deputy chairman, of the Agency.
	(4) In appointing a person to be a member of the Agency, the Secretary of State shall have regard to the desirability of appointing persons who have knowledge of, or experience relating to, matters relevant to the functions of the Agency.
	(5) A member of the Agency may hold office for such a period as the Secretary of State may determine, but not exceeding—
	(a) six years, in the case of the chairman, and(b) four years, in the case of other members.
	(6) The Secretary of State may make payments to the members of the Agency by way of remuneration and make payments to them in respect of expenses incurred by them in the performance of their duties.
	(7) The Secretary of State may also defray any other expenses of the Agency."
	After Clause 18, insert the following new Clause—
	"Functions of Pensions Unclaimed Assets Recovery Agency
	The functions of the Agency are—
	(a) to obtain such information about such classes of unclaimed assets as may be prescribed by the Secretary of State by regulations;(b) to provide the Secretary of State with that information and any other related information held by the Agency which the Secretary of State may from time to time require;(c) to administer the scheme to be established by virtue of section (Transfer of unclaimed assets)."
	After Clause 18, insert the following new Clause—
	"Pensions Unclaimed Assets Recovery Agency: provision of information
	(1) Subject to subsection (2), the Agency may, by notice, require any person to supply it, within a specified period or at a specified time or times, such specified information as the Agency considers it needs for the purposes of carrying out its functions under section (Functions of Pensions Unclaimed Assets Recovery Agency).
	(2) This section does not authorise any requirement in relation to information to be imposed on any person unless that person carries on a business in the United Kingdom; but a requirement may be imposed under this section on a person in relation to information in the possession or control of a connected person or undertaking outside the United Kingdom.
	(3) Any person who, when required to do so under this section, fails without reasonable excuse to supply any information, shall be liable on summary conviction—
	(a) to a fine not exceeding level 5 on the standard scale; and(b) in the case of a continuing offence, to an additional fine not exceeding £200 for every day during which the offence continues.
	(4) Any person who knowingly or recklessly supplies any information which is false or misleading shall be liable—
	(a) on conviction on indictment, to imprisonment for a term not exceeding two years, or to a fine, or both; and(b) on summary conviction, to a fine not exceeding the statutory maximum."
	After Clause 18, insert the following new Clause—
	"Transfer of unclaimed assets
	(1) The Secretary of State shall by regulations, not later than twelve months after the passing of this Act, establish a scheme ("the Scheme") for the transfer of such unclaimed assets as the regulations shall prescribe to the Lifeboat Fund.
	(2) Regulations made under this subsection shall provide for—
	(a) a definition of those unclaimed assets to which the Scheme applies, including the extent to which the Scheme is applicable to assets whose ownership is known, or can be determined;(b) the transfer to the Lifeboat Fund of a prescribed proportion of such unclaimed assets as the regulations shall prescribe, and the manner and timing of such transfers;(c) the transfer to the Lifeboat Fund of liability for any claim in respect of assets transferred under the Scheme to the Lifeboat Fund;(d) penalties to be imposed on any person holding assets prescribed under subsection (1) or (2)(b) who fails to transfer them or such proportion of them as is prescribed in accordance with the Scheme.
	(3) The power to make regulations under this section is exercisable by statutory instrument.
	(4) A statutory instrument containing regulations under this section is subject to annulment in pursuance of a resolution of either House of Parliament."
	After Clause 18, insert the following new Clause—
	"Purchase of annuities
	The Secretary of State shall, as soon as is reasonably practicable, by regulations require the trustees of qualifying schemes as defined by the Financial Assistance Scheme Regulations 2005 which have not yet completed winding-up to desist from purchasing (except where, on or before 18th April 2007, they have entered into a binding contractual commitment so to do) or making binding commitments to purchase, annuities on behalf of scheme members, for a period of nine months from 18th April 2007."
	After Clause 18, insert the following new Clause—
	"Duty to make on-account payments
	(1) Pursuant to his powers under section 286(3)(d) of the Pensions Act 2004 (c. 35), the Secretary of State shall as soon as is reasonably practicable make regulations requiring trustees of qualifying pension schemes to make on-account payments to qualifying members, or persons who would be qualifying members if the qualifying age for the Financial Assistance Scheme were set at the level of the qualifying scheme retirement age.
	(2) The Secretary of State may make such loans to trustees of qualifying schemes as appear to him to be expedient to enable them to make such on-account payments where adequate scheme assets appear to him not to be available to them and regulations may prescribe for the recovery of such loans upon completion of wind-up of a qualifying scheme.
	(3) Regulations made under subsection (1) shall provide that on-account payments shall equal the amounts that would be payable if the qualifying scheme were accepted into the Pension Protection Fund.
	(4) The regulations shall provide for payment to trustees of a qualifying pension scheme of payments due to a qualifying member of that pension scheme (or a person who would be a qualifying member if the qualifying age for the Financial Assistance Scheme were set at the level of the qualifying scheme retirement age) by the Financial Assistance Scheme or by the Lifeboat Fund (as defined in section (Transfer of unclaimed assets)) in respect of periods for which on-account payments to that member have been made in accordance with subsection (1)."
	On Question, amendments agreed to.

Baroness Hollis of Heigham: moved Amendment No. 77:
	After Clause 18, insert the following new Clause—
	"Application for pension sharing order by those resident outside the United Kingdom
	(1) The Matrimonial and Family Proceedings Act 1984 (c. 42) is amended as follows.
	(2) In section 15(1)(c) at the end insert "or any pension arrangement within the meaning of section 19 of the Welfare Reform and Pensions Act 1999 (c. 30)"."

Baroness Hollis of Heigham: I shall speak also to Amendments Nos. 78 and 165. We move on to a different subject, connected with the previous one only because it stems in part from the 1994-95 Bill. It covers leftover business not just from then but from the Welfare Reform and Pensions Act 1999, which established pension-sharing on divorce, after many years of campaigning around the entire House led by the much missed Baroness Young and Baroness Seear.
	Why are these amendments necessary? Essentially, if a British couple retire to Spain and a few years on get divorced, their only assets may be the home and an occupational pension. Part III of the Matrimonial and Family Proceedings Act 1984 allows English courts to make property adjustment orders following a foreign divorce. A wife can still get a fair share of the home even though the divorce between two British citizens is taking place abroad. But sharing those assets would not include sharing the pension, even though it was earned in Britain and provided by a British company. Many EU and other countries cannot legislate to make pension-sharing orders, and even if they do they are invariably not recognised by UK pension arrangements and so are not implemented. I shall give an example. A couple I was told about moved to France, using their savings and family home to buy a new house there. No further assets apart from the husband's occupational pension were available. He then left her, they sold the house, shared the proceeds and divorced in France. The French court cannot make a pension-sharing order, and even if it did it would not be honoured by British companies. The wife is in her 60s and finding it hard to get a maintenance order from the French court. She is struggling to survive on casual work as a gardener.
	I suggest to my noble friend that a simple amendment is needed to put pension-sharing on the same footing as the former matrimonial home, so that the jurisdiction is dependent on where the asset is based not on the residence and domicile of either of the parties. This is a loophole left over from the previous legislation, and I am as guilty about that as anyone, that is for sure.
	A second issue, unconnected to the foreign jurisdiction point but also left out of the 1999 Act by mistake, is the need to be able to make an order attaching death-in-service benefit, which is a lump sum, and a pension-sharing order in relation to the same pension. It is becoming increasingly common that where the court orders payments of spousal or child maintenance, the recipient, usually the wife, will seek to ensure that the payment is covered should the former husband die in service before it is made. However, insurance policies are an expensive way to deal with this. An attachment order to the death-in-service benefit would achieve the same thing in an inexpensive and straightforward way. We should certainly do something about this as well.
	Amendment No. 78 covers leftover business from the Pensions Act 2004. We decided, in part because we ran out of time, to exclude pension-sharing provisions from the Pension Protection Fund and the financial assistance scheme. Technically this was done because moneys from the PPF or FAS were compensation or a contribution to loss rather than the original pension. None the less, under the PPF an individual may receive 90 per cent of the original pension, and under FAS 80 per cent. That may represent a significant asset, one as valuable as the matrimonial home. For example, a PPF pension of £20,000 requires a pot of nearly £300,000. That sum would be excluded from any formal divorce pension-sharing arrangements. In other words, if you divorce before your company comes into the PPF, or even if you divorce during the assessment period, pension-sharing would be honoured. If you divorce a month or two later, after the company scheme has come into the PPF, it is not. The spouse's access to a share of the pension, which may be more valuable than the home, is determined not by the circumstances of the divorce, not by the size of the assets involved, and not by any offsetting that may have taken place, but by the timing of the company's fortunes. I do not think that that is fair. Virtually all other UK pensions are open to pension-sharing, including the basic state pension by substitution rules and the state second pension. It is unfair that pension pots coming through the PPF and FAS, which may be infinitely more generous than S2P, are excluded.
	I ask my noble friend whether there is any possibility that in the course of this year or even in next year's Bill we could bring forward regulations or whatever is necessary to rectify anomalies which, while they may affect only a small number, for those who are so affected are quite serious and were certainly never part of the intention and spirit of the original legislation, which had the support of the entire House. I beg to move.

Baroness Morgan of Drefelin: I am grateful to my noble friend for raising the important issue of the part the Government play in enabling fair and equitable settlements on divorce. Indeed, she was the Minister responsible for introducing in this House the relevant provisions in the Welfare Reform and Pensions Act 1999. I am disappointed that the Chamber is slightly less full than it was earlier because I thought this would be a good moment to pay tribute to my noble friend on her record of campaigning for women's pension rights. If they were still in their places, I am sure that other noble Lords would join me in that tribute.
	I shall deal with Amendment No. 78 first. As my noble friend has described, it seeks to introduce new legislation to enable compensation from the Pension Protection Fund or assistance via the financial assistance scheme to be shared upon divorce. Of course, divorce settlements should be fair, which is why the legislation already ensures that the value of Pension Protection Fund compensation is taken into account by the court as an asset. The legislation also provides for situations where a court has already issued a pension-sharing order and enables the Pension Protection Fund to implement such orders notwithstanding that the pension scheme has been drawn into the Pension Protection Fund. Current legislation allows the value of a pension to be shared on divorce; however, once a party to a divorce is already receiving compensation, or assistance instead of a pension, the court has no powers to share any part of that with the other party.
	I have great sympathy with my noble friend's amendment and I am very interested in the cases she describes. Although the Government are not aware of anyone losing out currently, we are actively looking at what we can do to ensure that problems do not arise in future. As my noble friend is aware, this involves engaging with the devolved Administrations in Scotland and Northern Ireland to ensure that any measures we take work effectively across the different family law jurisdictions of the United Kingdom.
	We also need to ensure that such provisions would work as intended and would not add unnecessary costs or burdens to individuals, the Pension Protection Fund or taxpayers. For this reason the Government do not believe that it is appropriate to introduce the relevant provisions into this Bill. Instead, any necessary legislation would form part of a Bill in a future Session when we have had time to consider properly what would be required to enable court orders to be made and implemented.
	I hope my noble friend will accept my assurances that the Government are aware of the issues she raises and are working across government and with the devolved Administrations to identify fully any legislation that is necessary to ensure fair settlements where financial assistance scheme assistance or Pension Protection Fund compensation is involved.
	Amendment No. 77 seeks to extend pension-sharing to those who have a pension arrangement within the terms of the Welfare Reform and Pensions Act but who live abroad and are divorced abroad, as my noble friend described. All current jurisdictional requirements require one or both of the parties to have been domiciled or habitually resident in England and Wales at some point during or since the marriage, or to have a matrimonial home here, hence providing a personal connection with England and Wales. We need to understand further why my noble friend considers that being a member of a UK occupational pension scheme is analogous to the condition of having a beneficial interest in a dwelling house. The latter requires the couple to have resided as a married couple in England and Wales at some point, while the former does not. I am advised that if this were the case it would open up our courts to applications for domiciliary relief on divorce abroad from those whose only connection with England and Wales is where their pension is based.
	However, we are very happy to discuss this issue at a future date, when it would be important to involve not only the DWP but the Ministry of Justice, which has responsibility for matrimonial law.
	Amendment No. 165 would allow the court to make both a pension-sharing order and an attachment order for a death-in-service lump-sum payment in respect of the same parties to a marriage and the same pension arrangement. As my noble friend knows, since the introduction of pension-sharing, divorcing couples have had to choose between attachment and pension sharing. Those who choose pension-sharing achieve a clean break and will become entitled to an income regardless of the circumstances of the other party. Income from an attachment order is not so secure; hence the issue of insurance raised by my noble friend.
	The Government's current interpretation is that to allow a former spouse to benefit from both a pension-sharing order and an attachment order would cut across the principle of a clean break. It would also add significantly to the complexity of administering the pension on divorce provisions, particularly if either party subsequently remarried and divorced again. By choosing pension-sharing a former spouse acquires an asset in her own right, which provides security of income at normal benefit age. Having made this choice, a former spouse cannot expect to retain the link, having made a clean break with the other spouse, that an attachment order implies. However, we are willing to consider this matter further to see if there is a substantive issue. Again, this needs to be discussed in more detail.
	Having made my points on Amendment No. 78 in regard to FAS, and taking note that the issues my noble friend has raised are seen as interesting and important, I hope that she will consider withdrawing her amendment.

Baroness Hollis of Heigham: I am extremely grateful to my noble friend. She has taken on board the substance of the point that there are small loopholes left over which, in the flurry of activity, we did not necessarily cover at the time, and suggested a way forward. One is not asking for action tomorrow on this; none the less, some of these issues will grow in seriousness and notoriety as more and more people avail themselves of pension-sharing and then find themselves coming up against these little roadblocks, if I can call it that.
	I am grateful to my noble friend, both for the warm way in which she has responded and for her suggestion of future talks, which, obviously, will engage the professionals who have to counsel people on how to handle divorce settlements. With my appreciation, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.
	[Amendment No. 78 not moved.]

Lord Oakeshott of Seagrove Bay: moved Amendment No. 79:
	After Clause 18, insert the following new Clause—
	"Financial Assistance Scheme: payment
	The Secretary of State shall by regulations ensure that payments made to any person under the Financial Assistance Scheme as defined by the Financial Assistance Scheme Regulations 2005 (S.I. 2006/1986) shall equal the amount that would be payable to that person if that person were entitled to receive benefits under the Pensions Protection Fund."
	On Question, amendment agreed to.

Lord Brabazon of Tara: Does the noble Lord, Lord Oakeshott, wish to move Amendment No. 80 formally?

Baroness Hollis of Heigham: It is not possible to accept Amendment No. 80 because a decision has already been made on a conflicting amendment.

[Amendment No. 80 not moved.]

Baroness Morgan of Drefelin: This might be an appropriate moment to resume the House. In doing so, I suggest that we resume the Committee no later than 8.30 pm.

Moved accordingly, and, on Question, Motion agreed to.
	House resumed.

Business

Lord Davies of Oldham: My Lords, the next debate is somewhat crowded for business of only one hour. The rules of the House dictate that speakers should have only two minutes each. We can stretch that to three minutes, the Minister having agreed to forego two minutes. However, I must insist that three minutes is three minutes; the moment "three" appears on the clock, the Member speaking will have to sit down for us to be in order.

Economy: Creative Industries

Baroness Bonham-Carter of Yarnbury: asked Her Majesty's Government what assessment they have made of the role and contribution of the creative industries to the economy and well-being of the United Kingdom.
	My Lords, I am extremely grateful that so many of your Lordships have turned up to take part in the debate. It makes the point that this is an interesting and important subject to which not enough time is given, not only tonight but in general. Noble Lords should not waste their precious minutes thanking me for the debate.
	The creative industries are a central part of civic and community life, not an optional extra. They give people a place in which to exercise and enjoy their imagination. They define and bind communities, providing understanding of the world we inhabit and what makes us human. They spearhead regeneration, contribute to social cohesion and improve the quality of life, all of which enhances the well-being of the UK.
	The creative industries are not a cultural sideshow. They are not trivial just because a lot of them relate to entertainment. They are a key economic driver; indeed, they are the fastest growing sector of the economy, growing at 5 per cent per annum and generating 7.3 per cent of the UK's GDP. They are bigger than the financial services sector and provide jobs for around 2 million people. Recent technological advances—the internet, digitalisation and so on—are only increasing their potential. The UK has the third largest computer and video games market in the world, the third largest market for music sales and the economic benefit of the visual arts sector is estimated to be in the region of £1.5 billion per annum. In an era which has seen manufacturing jobs halved since 1997, the creative sector is the new economy. Real value nowadays lies in design, not manufacture.
	I was recently in Sheffield, a case in point. The city's economy was based on the industries of steel, cutlery and engineering. When these collapsed, Sheffield City Council was one of the first in the UK to turn to the cultural industries as an alternative source of employment creation and urban regeneration. There, it was discovered that putting money into culture became investment rather than subsidy. Jonathan Kestenbaum, chief executive of NESTA, has spotted this. The other day he said that,
	"as globalisation drives down the costs of manufacture, it is in the industries where creativity and tacit knowledge are at a premium that the value-add for UK plc lies".
	Despite this, creativity is not given the status it deserves.
	It starts with education. Creativity needs to be nurtured from the beginning, yet creative skills are stifled in our schools by a system dominated by exams and league tables. Priority is given to what is measurable, not to open-ended exploration. With the rejection of the Tomlinson report, the national curriculum continues to undervalue vocational qualifications; I am obviously not talking about higher education here.
	I was recently present at an interview with Jude Kelly, an exemplar of success in the creative industries, in which she made a very interesting point. In the past, the opportunity to read and write was not seen as a basic human entitlement. Nowadays, the opportunity to be creative is treated in this way. Her argument is that the nurturing, exercising and development of the imagination is as liberating as the ability to read and write. The Government's Creative Partnerships scheme, which sends artists into schools to work with teachers and pupils, proves her point. It has been hugely successful. It helps teachers to teach more imaginatively, crucially across the whole curriculum, and to focus on developing creative skills that are fundamental to success in the 21st century; its 2006 Ofsted report was glowing. The Minister has said to me on many occasions that this scheme is safe, but further assurances are always welcome. The Government should readdress the balance and raise the profile of creativity within schools generally.
	Another contribution the creative sector makes—it is a point of well-being—is in furthering people's understanding of the communities they live in, the nation they inhabit and the world as a whole. Britain has historically recognised this. In 1753, the British Museum was created—the first national museum in the world. In the words of its present director, Neil MacGregor:
	"It was a product of the Enlightenment—a conviction that knowledge and understanding were indispensable ingredients of civil society".
	Instead of dwelling on what makes us different, we should understand how we overlap.
	Thanks to free admission to DCMS-sponsored museums and galleries, courtesy of the noble Lord, Lord Smith of Finsbury, capital investment due to lottery funding and the Renaissance in the Regions programme, many more people are able to benefit from this enlightenment, as well as the pleasures it offers. A visitor to the recently reopened Weston Park Museum in Sheffield wrote in the visitors' book that,
	"the people responsible at the Museum have tried to be as inclusive as possible with all the different communities in Sheffield and the outcome is fantastic as no group feels excluded from visiting".
	An exhibition at Manchester Art Gallery, "Black Victorians", inspired a young fashion designer whose resulting collection, also entitled "Black Victorians", won an award at the recent London Fashion Week.
	Across the country, our museums and galleries are contributing to regeneration and social cohesion. They are playing a role in the creative and cultural economy through employment, inspiration and the opportunities they give to learn and exercise the imagination. Yet core funding for our museums and galleries has not kept up with inflation, while costs have risen at a higher rate. The present grant formula does not include the extra wear and tear to the buildings caused by their success, through the ever increasing number of visitors. Why not? Tony Travers, who wrote a report published in December 2006, said:
	"Without proper resources it is unlikely that the complex objectives now set for museums and galleries can be delivered".
	Yet they are such a success. The Minister reassured me the other day that the money already invested in Renaissance in the Regions was safe. But it is the funds that Renaissance has not yet received, and that are needed for the programme to be rolled out across the country as promised, that I am concerned about.
	I recognise that the funding of these industries is a complex ecology, which must involve a mixed economy. But the contribution that the creative industries make to our quality of life in both various and specific ways is not sufficiently taken into account when the question of what they are literally worth is calculated. The DCMS struggles to get heard in the Government. Its budget is just 2 per cent of that of the Department of Health. Look how much money was wasted on Connecting for Health, the DoH's IT programme. It was suggested in a recent Guardian report that the final bill will be £15 billion. Just a few million of that would so help the DCMS yet, instead, the Government have frozen the Arts Council's budget for the next three years which, with inflation taken into account, means a real-terms cut in funding from now. On 6 March, Tony Blair said:
	"We have avoided boom and bust in the economy. We don't intend to resume it in arts and culture".
	Yet only nine days later, Tessa Jowell announced a raid of £675 million more on the National Lottery good causes fund to pay for the increasing costs of the Olympics. All this is such short-sighted behaviour. As the Values and Vision manifesto of the cultural sector put it:
	"In this 21st century, goods, services and industries driven by knowledge and creativity will define Britain's competitive edge".
	A couple of weeks ago, Gordon Brown spoke these words:
	"The legacy of any Government has got to be to take culture seriously, as it is at the heart of everything that being British is about. I see the huge range of British success: we are winning Oscars, Emmys. We've got great cultural centres including Brighton and now Gateshead ... We have an enormous amount of creative work that makes us the great creative centre in the world and we have got to back that".
	A decade of sustained funding under Labour has seen an explosion in creativity, for which the Government should be congratulated. So I suggest to the Prime Minister-designate that he fulfils his own words and, on 27 June or soon thereafter, makes the following his "independence of the Bank of England" moment: that his Government will commit to maintaining investment in the creative industries, beginning with an appropriate and sustained settlement in the current Comprehensive Spending Review—that not only will there be, in the words of his predecessor, no boom and bust, but no more fear of bust.

Lord Smith of Finsbury: My Lords, I remind the House of my interests, among them my role as chairman-designate of the Advertising Standards Authority and as a non-executive director of Phonographic Performance Limited. I am particularly proud of having begun the work, when I was Secretary of State, that the Government have built on in establishing the importance of the creative industries and the creative sector of our economy, an increasingly important and growing part of the economy. I am also very pleased to note the excellent report of the Select Committee in another place on the creative industries, which was somewhat better than the Gowers report on intellectual property that also emerged recently.
	In the brief time I have, I shall concentrate on where the Government can help. The creative sector is a success story for Britain, and the Government can and should help to sustain its growth and importance. There are five ways in which the Government can and should help. First, they can sustain a vibrant, active and creative artistic and cultural life in this country because the creative industries and the entrepreneurialism that leads to them spring out of a vibrant culture. That is why the Comprehensive Spending Review in relation to the arts is so important. I agree with the noble Baroness on that. Secondly, there is education; that is, making sure that the spirit of creativity is nurtured and developed in our children right the way through the educational process. Thirdly, there is access to affordable accommodation for young, start-up creative entrepreneurs who want to live and work in clusters in vibrant urban areas, often where rising property prices and rents are prohibitive. Fourthly, there is access to finance, which is vital in order to start up creative businesses. Fifthly, and perhaps most importantly, there is copyright protection; that is, making sure that intellectual property value can be properly protected. For example, we need to look at giving music performers equality in copyright terms with everyone else concerned with the production of music. More than that, we need the Government to be very clear about the importance of intellectual property. Making sure that we protect it properly is the way that we will ensure a continued flow of creative endeavour.
	These are ways that the Government can help, and I urge them to sustain this success story by doing so.

Baroness Buscombe: My Lords, I declare an interest in this welcome debate: I have been chief executive of the Advertising Association since January 2007. I want to passionately, positively and proactively assert the virtues of the advertising industry, a creative industry I know well from past and current experience. I entirely agree with the noble Lord, Lord Smith of Finsbury, particularly in relation to intellectual property and the protection of copyright, but we ought to be championing other aspects of creative industry, and I shall concentrate on advertising.
	It is my strong belief that the creative industries are a huge and growing contributor to the economy by lifting horizons, enriching and improving the quality of life of British people and hugely benefiting society. The creative sectors are central to the economy. It is no accident that the creative industries are growing at twice the rate of the rest of the economy.
	Advertising is the third largest creative industry, and advertising expenditure in the UK passed £19 billion in 2006, according to figures to be published in June. The UK is the largest advertising market in Europe; indeed, Britain's advertising industry received more awards than that of any other nation in 2006. It is important to recognise the interdependence of the advertising industry and the rest of the economy. Advertising has, of course, a substantial impact on other creative sectors in the UK. Its supply chain includes activities such as graphic design, audio-visual production and interactive media. Given that the creative industries now represent 8 per cent of the UK economy, which means that they make a bigger contribution to the nation's GDP than the construction industry, the key strategic importance of the ad industry to the British economy is undeniable.
	Advertising is not only about generating wealth and selling products but also has intrinsic creative significance. It promotes innovation and increases and facilitates consumer choice. Indeed, advertising allows consumers to see the variety of choices available and to understand the differences between products. It drives competition, which drives down prices. There is a direct correlation between ad spend and economic growth, which leads to job creation. Public policy advertising campaigns raise awareness, inspire action and save lives. Indeed the Central Office of Information is consistently one of the top three biggest advertisers in the UK. We all remember campaigns on road safety, drink-driving, drugs and AIDS. They worked and informed because advertising works and informs. Advertising is used to showcase corporate green credentials, sustainable development and corporate social responsibility.
	Advertising, in my opinion more than any other industry, champions creative values and inspirational and innovative ideas. It can be compared and paired with other aesthetic arts such as music recording, publishing, and film and video production. It also funds culture and groundbreaking events. As Michael Payne, who was the International Olympic Committee's marketing director, said, there would be no Olympic Games without advertising.
	In recent correspondence on this issue, Martin Sorrell told me:
	"For the future of advertising, globalisation, over-capacity and the shortage of skilled human capital, new technologies such as the web, internal communications, concentrating distribution and corporate social responsibility are all driving growth in the advertising and marketing services industry, not just in the UK but throughout the world. As a result, without exception, every company faces the challenge of geographical growth and capitalising on the changes that new technologies bring. Differentiation is the key and the advertising and marketing services industry provides both tangible and intangible differentiation to all companies' goods and services".

Lord Patel: My Lords, I am sure that many noble Lords were surprised to see my name appear on the list of speakers in a debate on the creative industries. In previous debates relating to science and medicine and the contribution they make to economic growth, I have spoken about the need for funding at higher education level if we are to see growth in those industries, and that applies equally to the creative industries. I declare an interest as chancellor of the University of Dundee. The head of the strong school of art and design at my university tells me that it has difficulties getting undergraduates and, particularly, postgraduates trained to make them responsible for developing industries and taking sustainable creative design, for instance, to market.
	I found interesting a recent paper by Stuart Macdonald of Gray's School of Art at Robert Gordon University in Aberdeen that used design as an example. The paper states that design is the largest segment of the creative industries and represents 30 per cent of the sector and that Design Council research has found that companies that invest in design see that investment more than double in value. However, despite their growth, in the UK creative industries related to design remain a cottage industry dominated by small businesses that are also very young. The sector is unable to take up the new opportunities offered by sustainable design. Design graduates need business and financial planning skills, which they are not taught adequately because of the lack of resources. Postgraduate courses are needed, and Cox's report recommended them in order to create design-literate managers and business-literate designers. It is important that the Government recognise that more funding is required at higher education levels and at universities if we are to see greater growth in the creative industries so that they can make a greater contribution to economic growth.

Baroness Morris of Yardley: My Lords, I declare an interest as a director of the Performing Right Society. All noble Lords who have chosen to speak today understand the size of this sector and the growth we have seen in it in the past decade. If we combine the creative revolution with the technological revolution, the impact on our industry, economy and lives will be as great, if not greater, than the industrial revolution that occurred centuries ago.
	There are two aspects to that. First, new industries such as games are being created, and traditional creative industries, such as music and film, are having to redo business completely. We often forget that the creative industry allows personalisation and people to be individuals through design at a time when we talk about the global economy, mass production, mass communication and everything being the same. If we understand the nature of the creative revolution and how drastically it is changing our world, we will begin to take advantage of it.
	The second thing that is different about this revolution is that it is being driven by the consumer; it is being driven by individuals, particularly those under 21. It has happened in a very short time. All the changes we are talking about have come about within a decade. There is an argument that the market, consumers and those who can respond can drive the creative economy and the changes. There is almost an argument that we do not need government interference. The rapid change we have seen has done very well and contributed to the economy without too much interference by government. Like my noble friend Lord Smith, I think that the Government have a role, although so far they have been slow to respond and to realise what that role will be. That is understandable. When I think of ways to describe the creative industry, I think of people who work quickly, who break the rules, who look for an alternative way of doing things, who take risks and, when things go wrong, stand up and start again, and who are non-conformist rather than conformist. That is not a description of the way in which government works. It is bringing together two completely different cultures. That is why the Government sometimes take time to respond.
	I congratulate the Government on the work that they have done in recent years, but they need to provide a legal framework in which this explosion of activity can take place. I subscribe to the view that we have to protect the creator as much as we provide for the consumer. Creators are the leadership of this industry; without them it does not exist. We need to protect the creator in the same way as we nurture leadership in any other sector of the economy or area of life.

Lord Dearing: My Lords, 10 years ago I chaired a committee which recommended the creation of an Arts and Humanities Research Council with increased funding, especially for the arts, which had been much neglected. That came to pass, and I should like to concentrate my remarks on its contribution to the creative economy, with future funding in mind.
	The AHRC has established itself as the leading authority on research-based knowledge transfer and innovation in the creative economy. It has established itself as a trusted broker for the creative industries, working with them to identify significant barriers to innovation in the sector. It has challenged the narrow definition of research and development that precludes non-technological innovation, which is central to the creative industries. It has engendered an appetite for research-based innovation in companies that lack the capacity or, normally, the requirement to engage in research and development. It has done this through its knowledge catalyst scheme, which targets the micro-enterprises that typify the creative industries by placing in a company a graduate, with a university-based mentor, to address a particular issue and come up with ways forward. This has been a highly innovative approach, successful in attracting applications from organisations that were previously hard to reach.
	For big firms, the AHRC has developed innovative models of knowledge transfer through its knowledge exchange programme, based on 50:50 funding. The purpose is to use previously untapped research knowledge in the arts and humanities to deliver new applications in convergent media. One such is with BBC Future Media and Technology. This programme, in its pilot phase, has already attracted 60 applications involving researchers and staff of the BBC.
	It makes very good sense to foster the work done by the AHRC and for it to be recognised in the forthcoming funding round. I know that the Minister was in on the creation of the AHRC and I am sure that he is as keen as I am that it should be able to integrate fully with the creative industries.

Lord Howarth of Newport: My Lords, the creative industries are indeed precious, and we must nurture them. A balance-of-payments deficit on manufactures of £60 billion a year takes a lot of offsetting. Even after exporting Tracey Emin to Venice, we shall still not be paying our way.
	Creative industries are a mixed bag in terms of economic performance. While the growth in gross value-added of software, computer games and electronic publishing over a sustained period has been 11 per cent a year, the growth in GVA of designer fashion has been zero. If a skull, even a diamond-encrusted skull with a £50 million price tag, is to be emblematic of our economy as well as of our culture, then whispers of immortality may be deceptive. At all events, we need to be very good indeed at the creative industries, not least because they are growing fast in this country and in others—faster, even, in some other countries than they are here.
	What should the Government do? They should improve education for creativity. This is not easy; our educational tradition has been good at developing the rational and analytic faculties but much less effective in developing the imaginative and synthetic abilities. But if we can improve, through education for creativity, the self-confidence of young people, their motivation and their capacity to communicate along with their self-discipline and capacity for self-criticism, the benefits across the whole range of learning and the development of young people will be immense.
	The Government should energetically implement all the very sensible recommendations of the Roberts report. In addition, they should continue to help link the universities and the creative industries, as the noble Lord, Lord Dearing, has just said, and continue to back the very important work of knowledge transfer that the AHRC is doing.
	Otherwise, the Government should fund generously our museums, galleries, libraries, archives, theatres and orchestras—all our cultural organisations—so that they flourish. You get what you pay for. They should regulate sensibly; intellectual property rights should be flexible to adapt to the new situations that technological change creates and enforceable globally so that creativity is rewarded instead of sapped by the depredations of piracy and counterfeiting. They should tax sensibly: if the research and development tax credit excludes knowledge transfer in the creative industries from tax relief, then that should be changed. They should support creativity locally and regionally. There should be a duty on local authorities to support their own cultural institutions, with the resources to do so. They should enable access to finance for people who present themselves to the banks, as Oscar Wilde presented himself to the customs officer in the USA, saying:
	"I have nothing to declare except my genius".
	There must be affordable premises. The Government should promote clusters and critical mass. The lessons from London and Liverpool are that the preconditions of creative success are liberal migration policies and liberal attitudes to lifestyle.
	I hope that we shall see the Green Paper soon. After all, by the end of this month, the DCMS and the DTI may not even exist. I certainly hope we shall have a statement in July of a new, coherent vision. Above all, the Government must demonstrate that they value creativity. The irony is that if you support culture as a good in itself, it will repay you economically.

Lord Birt: My Lords, after speed dating comes speed debating. I should like to speak in celebration. The UK is blessed with astonishing creative vitality, whether in the performing and visual arts, the media and writing, music of every kind or architecture, fashion and food. The range, diversity and quality are extraordinary.
	As a country, we appear to have been doing something right for quite a long time. It is a mix of things. Our schools appear to be successfully nurturing individual creativity. Our arts educational institutions are simply world-class. Our regulation of, and investment in, public service broadcasting has fostered widespread innovation. Our national performing companies attain dizzy heights. We appear, too, to have the balance right, for success in the public sphere is matched by a corresponding vitality in the commercially funded sectors. There are plainly now powerful synergies at work in the UK between the public and the private spheres, with much crossover traffic going both ways.
	Creativity is spread wide across the land as well, but it is worth while, in this context, considering London, for it is the powerhouse of the UK economy. As a city, it achieves world standards of productivity, matching the United States. It makes a huge contribution through taxation to the rest of the UK. It is noteworthy that the creative industries, including fashion, publishing, advertising, architecture, design and many other arts-related activities, are now second only to business services as the largest contributor to London's vibrant economy.
	The final factor is that the UK is increasingly a magnet for the most talented, able and capable business people from all over Europe and beyond. Surveys tell us that those who come to work here are attracted not only by the sheer economic vitality of the UK, where the capital markets work especially well, but specifically by the liveliness, cultural diversity and sheer zest and creativity of life in the capital and beyond. Our national creativity increasingly underpins our economic development. The DCMS has powerful arguments to place before the Treasury.

Lord Giddens: My Lords, asking an academic to speak for two minutes is like some form of exquisite torture, since we normally talk for 50 minutes—and there is some of my two minutes gone already.
	I have three main points, which I shall make briefly. To reaffirm what other noble Lords have said about the crucial importance of the creative industries in the modern economy, one has to see that against the backdrop of the amazing changes that have affected the economy more generally. A generation ago, more than 40 per cent of the population worked in manufacturing and agriculture; now only 14 per cent of the population do so. There has been a tremendous change, and the creative industries are in a kind of vanguard in that new economy.
	Secondly, however, we should not make a ghetto for the so-called creative industries, a notion that anyone can see is suspect, as you need creativity in every industry. Alongside the reports mentioned, we should add the Cox Review of Creativity in Business, which was much more sobering than the picture that the noble Lord, Lord Birt, painted of arts industries. It showed that more than 50 per cent of firms had not introduced any new services or goods within the previous three years, indicating that there is a long way to go in that regard.
	Thirdly, on a note of caution, economists are saying that we are in a new phase of offshoring. The old phase of offshoring manufacture has probably gone about as far as it can, but IT offshoring is completely different; it could be vastly more radical. The Princeton economist Alan Blinder argues that no less than 40 per cent of jobs in the United States economy could in principle be outsourced, including many creative economy jobs in design, computers, film and television. As I go around the world speaking in universities, I am impressed by the degree to which other countries have many universities teaching completely in English. One can see that the whole level of competition is being ratcheted up. If the Minister would like to say something about the perils and opportunities of offshoring in the IT industries, I should be very happy.

Baroness Warwick of Undercliffe: My Lords, it is a pleasure to speak about the contribution of the creative industries to the UK, because those industries, as other noble Lords have said, are the dazzling jewel in the UK treasure chest. I am sure that noble Lords will say that that jewel should be displayed regularly and with considerable ostentation. Higher education institutions have an essential role in keeping that jewel sparkling. I declare my interest as chief executive of Universities UK.
	Higher education institutions provide the skilled workforce that enables the creative industries to succeed. Our smaller, specialist institutions, such as the Royal College of Art, the Royal Academy of Music and the Guildhall School of Music and Drama, are never undersubscribed and never short of successful, even world-famous graduates. Our larger, more mainstream universities equally play a role, as was shown in Universities UK's recent publication Higher Level Learning.
	I shall give just two examples—and there are many that I could choose. Abertay Dundee, with support from the industry, became the first university in the world to develop degrees in computer games technology. The London College of Fashion, part of the University of the Arts, London, has its own fashion business resource studio. Competition is intense; having a degree is not always enough. That is why universities offer placements, work experience and tailored vocational teaching. But to maintain this success—and I echo here everything that the noble Lord, Lord Patel, said—investment is needed.
	Government commitment to research and development, particularly in science, has been widely welcomed. I hope that the Minister will reassure me that this does not mean that the arts and humanities will be forgotten, since they are vital to the creative sector. Could he also comment on how the Government intend to support collaboration between higher education and small and medium enterprises, which are so prevalent in the creative sector? With proper support for applied research and incentives for university collaboration, our creative industries will continue to dazzle, both nationally and internationally.

Baroness McIntosh of Hudnall: My Lords, this is the text message version of a longer speech. The first message is that I agree with pretty much everything that has been said so far, by every speaker—remarkably, within the time limit set.
	The second message is that the creative industries include the performing arts—it says so on the DCMS website, so it must be true. The performing arts have led to very significant urban regeneration, and I give as an example the South Bank. Noble Lords can walk along the South Bank, see what has happened there and the economic activity that has followed. It is important that we recognise how significant the impact of large-scale cultural projects can be on producing regeneration.
	Thirdly, theatre, which is part of the performing arts, is big business. It is worth approximately £2.6 billion per annum in the UK, £1.5 billion of that in London alone. It attracts visitors and is a tremendous export success. An example of that is "The History Boys" from the National Theatre. Will my noble friend confirm that the Government understand the powerful contribution that theatre makes, both culturally and economically, and does he agree that we must be careful not to undermine that contribution? Can he also say what progress is being made to ensure that theatres are not adversely affected by the sell-off of analogue frequencies ahead of digital switchover in 2012? That is a bit of an anorak point, but I am sure that the Minister will have a very good answer.
	Finally, I shall say a very quick word about the Roundhouse in north London, of which I am proud to be a trustee. The Roundhouse has just completed a refurbishment, which cost about £30 million, of which 60 per cent has come from private donation and 40 per cent from public sources, both national and local. At the heart of the Roundhouse project is an inspirational new facility for young people, the Roundhouse Studios, which is equipped with performance spaces, recording studios, practice rooms, camera and editing facilities, musical instruments and much more. Some 4,000 young people have been through its programme since the building reopened. Most of them are from hard-to-reach communities, and many are linked to pupil referral units and youth services. They come to the Roundhouse to work with professional artists, technicians, marketing people and administration staff, to explore their own creativity but also to learn skills and develop attitudes that will help them into employment. This is another kind of cultural regeneration, regenerating minds and hearts, encouraging aspiration and supporting ambition, and we need much more of it.

Lord Haskel: My Lords, like all of us here, the Government are aware that the creative industries are important to our economic future. I congratulate them on that. But what needs to be done?
	I shall make two quick points. First, technology is rewriting the rules of the game. One result is that the arrangements for collecting royalties are now obsolete. The so-called summit on copyright in Brussels last week was inconclusive. So what is happening? The stakeholders—I hesitate to call them the players—are either pursuing their own individual solutions or heading for the courts. The Government are really going to have to get to grips with copyright because the uncertain economics will hold back the industry.
	Secondly, perhaps the main reason why the creative industries do so well here is that we are seeing art and culture in all their forms—high and low, sound and vision—breaking out of their traditional locations, forms and media and infiltrating every part of our lives. I hope that the Government will treat the creative industries as part of our total economy, not a subsection, because creativity, which touches a chord with people everywhere, needs to be in the mainstream of our economy, not somewhere out in the fringes.

Lord Clement-Jones: My Lords, what a distilled debate—we could probably sell bottles of it. I want very briefly to raise issues raised by the Select Committee, and referred to by the noble Lord, Lord Smith, in its excellent New Media and the Creative Industries report. The committee expressed strong concern about the lack of progress by the Government on copyright development, which in itself makes the argument for establishing a strategic advisory board on IP policy, as the Gowers review recommended. What plans do the Government have to include that in their Green Paper? I hope that they will take it forward.
	The committee urges the Government to press the European Commission to bring forward proposals to extend the term of copyright for sound recordings to 70 years. We on these Benches have always thought that that extension should be combined with archive protection and compulsory licensing. However, the industry itself is now moving voluntarily down that track. We strongly support the committee's recommendation. What are the Government doing in this respect? I asked an oral Question on this subject in December last. What consultations are taking place on the Government's recommendations to the European Union? The European Union is clearly in pole position on this, but the Government's attitude—since the UK has such an important position on music and recorded music copyright—will be vital.
	Then there is the question of piracy. The Government are simply not doing enough, the committee concludes. Exemplary damages need to be considered. The committee says that the deterrent effect of the current enforcement regime is zero. Action needs to be taken on unauthorised copying of films by camcorders in the cinema. There is also the question of the so-called file sharing of music.
	Finally, there is the question of fostering the investment climate in new media business development. In many ways we have gone backwards in this respect. I hope that the Green Paper will address all those issues. I hope that it does not consist only of a new task force—the previous one seems to have disappeared without trace. Even the Creative Economy Programme set up in 2005 is likewise not very visible. I look forward to hearing what the Minister has to say.

Lord Howard of Rising: My Lords, rather than "What assessment?", I suggest that it might in many ways be better if there was no assessment. Governments, when they look at things, have a nasty habit of interfering. The industries that most contribute to the economy, such as the advertising industry referred to by my noble friend Lady Buscombe, did not achieve their prosperity with the help of government. Indeed, one of the reasons for the recent decline, even if modest, in some of the creative industries can be directly attributed to government. The terrifying deluge of ill thought-out legislation and regulation is the exact opposite of the freedom from interference that makes the creative mind tick.
	As my honourable friend the shadow Chancellor of the Exchequer has commented, it is not possible for Governments to create creativity. The greatest assistance that government can give to creativity is not to interfere but to leave it to take its own unpredictable path. When Handel, Mozart and Haydn came to London, it was because of freedom from government, not because of interference or subsidy. If my noble friend Lord Saatchi were here, he would no doubt tell us that his brother—however ill advised some might think it—has been a far more conspicuous and successful patron of Brit art than have government. Historically, theatres and music have prospered on their own. Their successors in the entertainment industry still do. Video games, iPods, televisions and so on developed without taxpayers' help. Government interference hinders their evolution.
	Perhaps, if the Government have to interfere, they could reverse the imposition by the European Union of the droit de suite and other actions of the European Union that have done so much to harm the fine art industry in the United Kingdom as well as addressing the problem of copyright piracy referred to today.

Lord Evans of Temple Guiting: My Lords, I start by thanking the noble Baroness, Lady Bonham-Carter, for securing this debate. Like everyone else, I think that it is a great shame that we have had to do it so quickly. There are some very important matters to be discussed but we will not have time to do so.
	Last week I spent a great deal of time at the literary festival at Hay-on-Wye. Although it is called a literary festival, it is much more than that. It is a week when many major players in the creative economy converge on Hay, turning this small town into a hub of creativity—a live testament to the importance of the creative economy. People from film, music, literature and theatre come together and talk; and if you listen, no one would doubt the existence and growing importance of this part of our economy—growing, as we have heard, at twice the rate of the economy as a whole, with exports for this sector of around £13.6 billion. My noble friend Lord Haskel argues that it must be seen as central to our economy and not as a sideshow. He is absolutely right, as is the noble Baroness, Lady Bonham-Carter, who made the same point.
	Let me give a few examples of what I heard at Hay. Tim Bevan, of Working Title, told me that "Mr Bean", yet to open in the US, has already grossed $181 million around the world. Andy Harries, of Left Bank Pictures, which made "The Queen", directed by Stephen Frears, told me that it cost $15 million to make, was shot and edited entirely in the UK and has taken to date—and it is just at the beginning of its run—$120,000,000 worldwide. But the British film industry, as we have heard, is flourishing not only in London. John Newbigin told me that last year two international hit films were made in the West Midlands—I did not know that. "Confetti" sold to the US market for four times production cost and the acclaimed "The Road to Guantanamo" has been sold in 23 countries around the world. Neither of these films would have been made without the support of Screen West Midlands, a regional support agency for the West Midlands film industry.
	A record 12.3 million people attended the London theatre, and we heard from my noble friend Lady McIntosh the value of theatre both inside and outside London. I had hoped that the noble Lord, Lord Lloyd-Webber, would be in his place this evening, but he is abroad preparing the sequel to the fabulously successful "The Phantom of the Opera". The total value of UK film exports in 2006 was just under £600 million. As we know, the UK is second only to the US in the global art market.
	The other evening, my noble friend Lord Rogers won the prestigious Pritzker Prize, the Nobel Prize for architecture, reminding us that UK firms account for eight of the top 10 architectural firms in western Europe. Our music industry is the third largest in the world, worth £6 billion. As an example, in March, Amy Winehouse's album "Back to Black" entered the Billboard chart in the US at No. 7, with 57,000 sales in the first week. By the end of May, it had sold more than 400,000. Closer to home, British music artists are the dominant force in Europe. Nineteen of the 36 IFPI platinum awards made to artists selling more than 1 million copies of an album across Europe went to British acts.
	UK book publishing is the largest in Europe, exporting more than 40 per cent of what it produces. Nobody will be surprised to learn that the sales of JK Rowling's six Harry Potter books exceed 325 million copies. As we have heard, the UK is a world leader in computer games. Grand Theft Auto has sold more than 50 million copies worldwide, with a revenue of nearly £2 billion.
	I could talk about many things but I do not have the time. I am particularly pleased that the noble Baroness, Lady Buscombe, talked about advertising, which is a very important creative industry, and that the noble Lord, Lord Patel, touched on design. I have not mentioned Brit art and Damien Hirst's diamond skull. These are all extraordinary examples of the vitality and economic worth of this industry.
	Many speakers asked about the Government's role in this vital part of the economy. I have heard before the view expressed by the noble Lord, Lord Howard of Rising, and it is a perfectly reasonable position to take—that the Government have no role and should just let creative people get on with it. My view and that of the Government is that a benign framework should be provided within which the creative industries can flourish. The Government should also provide the statistics to monitor the growth of the creative economy. To go off message for a moment, my own view is that the creative economy is worth a good deal more than 7 per cent of our gross national product.
	The Government must continue to fund the arts properly because the arts are the catalyst for much of what has happened and will happen in the creative economy. Like the noble Baroness, I was greatly heartened by the speech made by the next Prime Minister at Brighton, in which he recognised the contribution that government arts funding makes to the creative economy.
	Education, which is so important at every level, was stressed by noble Lords. Some people in the popular music world whom I knew a few years ago had all been educated at art school. I refer to Pete Townsend, Brian Eno and Ray Davies of the Kinks. Perhaps that was the case with that whole generation. Are art schools still as creative now as they were then? Is there that same extraordinary creative activity that there was in the 1970s and the 1980s? As I say, education is hugely important.
	The Government should prepare reports that focus on aspects of this economy that need careful thought. That was mentioned. I refer to the Cox review of creativity, the Roberts report on creativity in schools and the Gowers review of intellectual property. I add my voice firmly to those who praised the Culture, Media and Sport Select Committee report into the creative industries. It is an excellent report and I hope that everybody will heed it. The creative economy Green Paper, which is expected to be published shortly, will set out the Government's vision for supporting our creative sector. This will be a significant step in the Government's support for the creative industries and will build on the excellent work of the creative industries task force in 1998 and the 2001 mapping document.
	My noble friends Lord Smith and Lady Morris, the noble Lord, Lord Clement-Jones, and others touched on an issue that in itself deserves a full debate; namely, the protection of intellectual property in the digital age. Grave problems need to be addressed but we are all at one in saying that, without protection from piracy in whatever form or guise, all aspects of the creative economy will be damaged, including its future growth and worth. It is extremely worrying that people are arguing rationally for copyright work to be available at the point of creation. We must resist that. People will create only if their work is protected. We must do everything that we can to discuss this, push back that boundary and make sure that anybody who steals creative work is dealt with appropriately.
	Unfortunately, I do not have time to answer the specific questions asked by my noble friends Lord Giddens and Lady McIntosh, but I undertake to do so shortly. In the mean time, I thank all noble Lords for being so incredibly positive about this economy. We must all keep talking about it and do everything that we can to protect the people who create it for us. We should keep discussing it and keep stressing its vital importance not only to our way of life but to our children and our economy.

Lord Davies of Oldham: My Lords, I congratulate all who contributed to the debate and, somewhat embarrassedly, beg to move that the House do adjourn during pleasure until 8.30 pm.

Moved accordingly, and, on Question, Motion agreed to.
	[The Sitting was suspended from 8.26 to 8.30 pm.]

Pensions Bill

House again in Committee.

Baroness Howe of Idlicote: moved Amendment No. 81:
	After Clause 18, insert the following new Clause—
	"Equality of annuity rate between men and women
	Notwithstanding any statutory provision or rule of law to the contrary, any compulsory annuity forming part of a private sector pension shall be payable at the same rate to men and women."

Baroness Howe of Idlicote: The purpose of the amendment is to draw attention to the fact that equal opportunities legislation is not effective in the area of annuities. It should apply there and I hope that I can persuade noble Lords of that. The amendment defines the area in which there should be no discrimination between annuities granted to a male and a female on the same terms in a private pension.
	This issue has a history and takes me back to my early days on the Equal Opportunities Commission. When the EOC was established, retirement age and pensions were firmly outside the scope of the Sex Discrimination Act 1975, and were not the concern of the EOC. In those days, we received complaints from men who thought it was unfair that they be required to work for five years longer than women before they could receive their pensions. We also received complaints from women because they were not allowed to work beyond the age of 60, and therefore earn the higher pension resulting from their retiring at 65. I accept that the situation has become more flexible since then. It was not long before pensions, following a legal case, were viewed as pay. Equal pay was firmly part of the EOC's responsibility, because it was covered by the Sex Discrimination Act, both to encourage equal opportunities and to enforce the legal requirement for equal pay for work of equal value.
	Today, there are other forms of discrimination, which were mentioned on the first day of Committee, and certain sections of the community are much worse off than others. For example, people who have been to university are likely to live longer. People who have been involved in heavy manual work may have a shorter life, and so on. One accepts that. I very much admire what the Government are doing to equalise, as much as is humanly possible, the role of women as carers who have looked after many aspects of family life. If the state had paid for that the cost would have been horrendous. As many resources as possible should go towards making our society more equal. We have seen, in the amendments that we have already discussed, how keen your Lordships are to ensure that those already generous areas can be extended further.
	However, one is entitled to ask, as I did on Second Reading, for how long the responsible Minister will continue to defend what I and one or two other noble Lords regard as a grossly sex-based inequality. I am proud of our sex discrimination legislation and of the fact that it has set the pace for many other countries to follow. Perhaps I may quote figures given by the noble Baroness, Lady Hollis, who referred to the gender filter. She said that,
	"men's contributions for a full basic state pension will come down from 44 years to 30 years"—
	a gain of 14 years—
	"whereas women's will come down from 39 years to 30 years".—[Official Report, 14/5/07; col. 39.]
	That is nine years. Another method of calculating further reduced that period. Equally, an earnings link benefits most of those who have a complete basic state pension. Surprise, surprise: 92 per cent are men and less than 30 per cent are women. I would argue that that is not just sex discrimination, but even indirect sex discrimination—an important legal concept that was first introduced by the Sex Discrimination Act. One may apply the same conditions to men and women, but maybe one is disadvantaging one sex more than the other.
	I hope that I receive some encouragement from the Minister and that at some stage, as we advance towards the time when women and men retire at the same age, with the same level of responsibilities for caring and so on, this important principle of equal opportunities for men and women will not be left to the market—it would go wider than that if we had an equality Act—and we should consider whether the present situation can continue to be seen as fair and just. I beg to move.

Lord Skelmersdale: I suspect that the Minister will have some difficulty accepting this amendment; I cannot do so because life is unfair for women. Not only, as the noble Baroness said, do they live longer, but they also give birth, as my daughter-in-law is doing as we speak.
	I appreciate how galling it must be as a woman to be offered a lower annuity than a man for the same amount of money, but that is a reflection of the longer life expectancy that a woman can expect to enjoy and is based on market-assessed risk, not prejudice or discrimination. If a car insurer, for example, can offer a preferential insurance rate to young women because of their statistical likelihood to be safer drivers than young men—I must admit that that statistic surprises me, but be that as it may—I do not see how we can avoid similar differentiation for the elderly. I also take heart, as the noble Baroness did, from evidence suggesting that life expectancies are slowly converging as male life expectancy rises. I am sure that the market will respond and that the difference in annuities will adjust to incorporate this; if not, I agree that the Government ought to keep a very close watching brief on this.
	Before I sit down, I must say how nice it is that the noble and learned Lord, Lord Davidson, is joining us. Could it be that the Minister is suddenly in need of legal advice?

Lord Oakeshott of Seagrove Bay: I do not think that the noble Lord, Lord Skelmersdale, should be surprised to discover that women are safer drivers than men; if I were running a motor insurance company, I would be only too happy to have only women on my books.
	I pay tribute to the great work that the noble Baroness, Lady Howe, did at the Equal Opportunities Commission; indeed, I was special adviser to Roy Jenkins when we set up its predecessor, the Sex Discrimination Board. However, I am sorry to say that this is not an appropriate area for legislation; it is reasonable to let the market decide. I am sorry that we cannot support her.

Lord Turner of Ecchinswell: Although I, too, am very sympathetic to the noble Baroness for her great work on behalf of women's equality, I am not sympathetic to this amendment. It may appear to some people that it is unjust to women that they will receive at the age of, say, 65 a lower annuity rate than men but, if you switch it round and demand a unisex annuity, it will appear unjust to many men that they get the same annuity rate but, on average, for fewer years.
	There is a wider issue here: whether we want to encourage within the insurance industry greater or less discrimination of classes or pools of insurance. There are some dangers in going to the extreme end of discrimination—there are some complicated issues that will eventually face us involving genetic testing and the ability to predict whether someone has a predilection to a particular condition—but, on the whole, greater discrimination is likely better to serve the social ends that we might want. For example, it is the case that lower-income people have lower life expectancy than higher-income people. The existing annuity market involves a cross-subsidy from poor people to rich people. The insurance industry is increasingly looking at whether it can undo that cross-subsidy by having annuities based on the postcode, income or some other indirect indicator of likely life expectancy. If the result of that is that the working-class man from Glasgow ends up with a better annuity rate than the professional person from London, that would be a thoroughly useful form of discrimination, which will help to offset some of the problems of inequality in life expectancy.
	As I say, although we will face some extreme issues decades down the line about how we deal with genetic testing and so on, social purposes, at least for now, are better served by a better degree of discrimination between different, more narrowly defined categories of insurance risk than by trying to demand unisex, "uniclass" or other categories of intervention in the annuity market.

Baroness Hollis of Heigham: I am sure that my noble friend will reflect on the amendment, because the world has changed since we had these debates—even those that we had in 2004, let alone earlier ones.
	First, the retirement age for women will gradually rise, as I think is right and proper. Secondly, and more to the point, the current discrepancy in longevity between men and women has fallen sharply over the past 10 or 15 years. There is now a difference of about two and a bit years, whereas the gap by social class—which, to the best of my knowledge, is not reflected in annuities unless impaired life is involved—is now something like four and a half years. We take account of one but not the other. I do not understand why we should do that, except that gender is an easily recognised flag in the system in a way that social class may not be, but that is unfair to women compared with other determinants of life expectancy.
	The point made by the noble Lord, Lord Turner, about whether we want to go into sub-group specification or whether we want something more general is entirely valid. But if the market is to move in that direction, it should put a far lower premium and weight on gender, which may be a minor factor now coming into play, and far more on social class, of which the best predictor of longevity is further and higher education and a degree. To say that the current arrangement applies for the benefit of women in other areas of life, such as car insurance, is a very old-fashioned perspective on the part of insurance companies. I believe that we should be offering unisex insurance to young men and young women alike. Then, if the young man proves to be an erratic or dangerous driver because, for example, he is involved in a car crash, his premium should be increased. However, it would not be right to make predictions. It would not have been right to say, for example, that when my younger son, who is an extremely careful and cautious driver, was 21 or 22, he should have carried an extra weight compared with the young daughter at the house next door, who, for all the insurers knew, might have been far more of a flibbertigibbet—as my mother or grandmother would have called her—in her driving. That would seem to be an absurd example of post hoc, propter hoc, which should have no place in the insurance industry.
	The Government recognise that argument. As far as I am aware, there is no gender distinction in the basic state pension, the state second pension and, above all, GMPs—goodness knows, we have enough amendments on guaranteed minimum pensions coming up. In other words, so far as concerns the state—quite properly in my view—people receive the same pension, irrespective of gender. The privileged marital status should get a 60 per cent dependency element but men and women get the same basic state pension, whether it is collected at the age of 60 or 65, and the same applies to GMPs. Conventionally, GMPs are part of the core of occupational pensions—unless the noble Baroness, Lady Noakes, persuades the Committee to change its views on that.
	If, as a society and a state, we believe that it is right to have unisex cores in the state-element provision provided by contracting out, and in the state second pension or the basic state pension, why do we think that it is okay for the private sector to do things differently? I do not understand that. I accept that gender may remain a modest and diminishing marker, but other markers are far more important. If we insist on having a segmented insurance industry, we should re-examine this matter. I think that the day has come to say that this situation will not do for much longer.

Lord McKenzie of Luton: This has been a brief but fascinating debate, and I thank everyone who has participated. I shall touch on some of the points that were made earlier about annuity policies. I shall not dwell on those too much but shall focus on the specifics of the amendment. Perhaps I should congratulate the noble Lord, Lord Skelmersdale, on becoming, or being about to become, a grandfather. That is good news.
	We share concerns about the need to bolster people's income in retirement and, in particular, to address the position of women, who currently often do less well than men. The Government have introduced a number of measures to help to tackle this, many of which we have already debated.
	The Bill includes measures to improve women's state pension coverage by reducing the number of years needed to qualify for the full basic state pension from 39 to 30 years. The new weekly credits for relevant carers will make the scheme fair and more transparent and will significantly improve state pension outcomes for women. The new credit will reward parenting and caring equally with paid contributions.
	The new scheme of personal accounts will provide a straightforward opportunity to contribute to a high-quality, low-cost saving vehicle, making private savings truly accessible. These portable, flexible accounts will be available to people active in the labour market. People with caring responsibilities who take a break from the labour market will be able to continue to make their own payments into their personal account. Together with changes in society, which mean that more women now work and have more opportunity to build up both state and private pensions in their own right, these changes will help to improve women's income in retirement.
	As we discussed, annuities provide a regular and secure income for life, no matter how long that life turns out to be. Although not always well understood, annuities are at heart an insurance product. Like all insurance products, they work by pooling risk—that is the nature of the product that we are dealing with here—and risk is taken account of in setting the premium. The older you are when you annuitise, the higher the rate you will get in exchange for your pension pot. That reflects the fact that the older you are, the fewer years the insurance company will expect to have to pay for your annuity, so it can afford to pay you more per year.
	Similarly, it is an actuarial fact that currently, on average, women live longer than men—the time span might be narrowing—so women can expect to be paid an annuity for longer than men of the same age. Over their lifetimes they will, on average, receive equivalent value in exchange for the same-sized pension pot. I do not see that as discrimination. If one looks at the net present values of those two situations, one would expect them to come to the same amount. This amendment would change that to a situation in which women are given a more actuarially fair rate subsidised by men who would get a less actuarially fair rate. Such a move would also undermine the price-per-risk principle behind insurance products. Motor insurance has already been mentioned.
	The noble Lord, Lord Turner, raised interesting points, as did my noble friend Lady Hollis about the size of the cohort and whether one further segments the market there. We see that happening already with impaired life annuities. We have also seen some of those developments in the annuities market. Indeed, the Government encourage that. How fast it might go down the route to which the noble Lord, Lord Turner, referred remains to be seen.
	The EOC has recognised many of those difficulties and in 2004 it commissioned some research from the PPI on that issue. The PPI concluded that the introduction of unisex annuities was unlikely to be of widespread and significant benefit. The PPI work informed the EOC's input into the EU draft directive on equal treatment between women and men in access to goods and services, when that was considered by the House of Lords Select Committee on the European Union in the spring of 2004. The EOC has said that the Sex Discrimination Act currently allows insurers to set different rates for women and men. However, a draft directive being debated in Europe originally included a proposal to change that by banning insurers from using data based on gender when calculating insurance and annuity rates. The EOC has called for the draft directive instead to be amended so that insurers can still set different rates for women and men, but with strict limits on how data based on gender could be used.

Baroness Hollis of Heigham: One of the things that informed the EOC's position at the time was that a lot of married women did not have an annuity in their own right, but depended on their husband's annuity and, therefore, those married women would have lost out were their husband's rate depressed in order for the rate of other women—single women, women with annuities—to rise. I have reason to believe that that may have influenced the thinking at the time. I believe that everyone's mindset has moved on since then and one should not assume that one should protect dependent women at the expense of those who try to protect themselves. My noble friend is relying quite heavily on the EOC's arguments and material. If, since 2004-05, the EOC were to change its position on that, would that help to move the Government's thinking forward?

Lord McKenzie of Luton: If the EOC were to change its position, I am sure that the Government would reflect on that and on the reasons why. These are serious issues and we should have continuing focus on them. I know that the noble Baroness, Lady Howe, has a long association with the EOC, which accepted the case for different annuity rates for men and women being allowed to continue, partly for the reason that my noble friend has outlined.
	Under Article 5 of the directive, special provision is made to allow member states, when implementing the directive, to maintain the use of sex as a determining factor in the assessment of risk based on relevant and accurate actuarial and statistical data. At present, the Government intend to apply those provisions to maintain the current position in the UK. A consultation document on the proposed implementation, which has to be completed by 21 December 2007, is being prepared.
	In conclusion, while we are sympathetic to the desire to improve the retirement income of women, we do not think that reducing men's retirement income by introducing a distortion in the insurance market which undercuts the principle of pricing for risk is the way to do it. Instead we have set out a number of proposals which will improve retirement outcomes for women. We believe that that is the better approach currently. I hope that the noble Baroness, although disappointed, will feel able to withdraw her amendment.

Lord Skelmersdale: The Minister has just said that at present the Government intend to use the derogations in the EU legislation. Does that mean that there is a possibility of changing?

Lord McKenzie of Luton: It would not be fair to read that into "at present"; I was simply stating the current position.

Baroness Howe of Idlicote: I am not altogether surprised I have not got as far as I might have hoped with my amendment. I have to say to the noble Lord, Lord Oakeshott, that when the Select Committee came back from Europe with the news that insurers could charge young male drivers more than young female drivers the noble Lord, Lord Lester, and I immediately jumped into the ring and said that we did not think that that was even remotely a good idea. We were setting the scene for when I hoped he might support me in getting rid of such discrimination. I am sorry that the noble Lord, Lord Lester, who I know is returning to this country tonight, is not in his place, or I might have hoped to have from the Lib Dems a rather more enthusiastic endorsement of what I am trying to achieve.
	I am rather encouraged by what I have heard from the noble Baroness, Lady Hollis. Who knows—there may be some sort of shift on the horizon in the thinking of the EOC. If that happens, maybe we shall see changes occurring rather faster than is being indicated. For the moment I am happy to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Whitty: moved Amendment No. 82:
	After Clause 18, insert the following new Clause—
	"Early payment of compensation: serious ill health
	(1) The Pensions Act 2004 (c. 35) is amended as follows.
	(2) In paragraph 25(2) of Schedule 7 at the end insert "unless it is satisfied that a person is eligible for periodic or lump sum compensation due to serious ill health"."

Lord Whitty: I have not troubled the Committee stage of the Bill or any of its process hitherto, and I can assure the Minister that I do not intend to do so at length tonight or subsequently. However, I regard this as an important amendment. At this stage, it is a probing amendment. I have no doubt that its objective could probably be achieved in a different way, so if the Minister could guide me in that direction, I should be very grateful.
	I am dealing here with a relatively vulnerable group of people. The amendment seeks to amend the Pensions Act 2004 so that those suffering from such severe ill health and disablement that they can no longer work would be entitled to benefit from the FAS, first, before they are 50 and, secondly, to the extent of a full pension or, at least, a not heavily discounted pension.
	The schemes under which these people thought that they were covered were negotiated and instituted many years ago. At the time they appeared to be pretty watertight schemes for substantial groups of workers, who went into them either compulsorily or in good faith as a result of advice from their unions or pension advisers. The fact that these schemes have now been reneged on seems to hit this particular group worse than others. Although everybody is disadvantaged after the collapse of these schemes, this particular group, because of the way in which the regulations are written, seems to be more seriously disadvantaged.
	The schemes cover industrial manual workers. We are talking about people with genuine health problems, which would normally be dealt with by early retirement. I suppose that I should declare an interest: many years ago I helped to negotiate some of these schemes for my union, the GMB, and I still advise on that. These schemes looked very good in the 1970s and the 1980s. The problem that was recognised in their original drafting should at least be acknowledged.
	I will give an example of one such scheme. I shall not mention the name, but it concerns a leading manufacturer of asbestos products, which is now covered by the FAS. It is not in the part of the asbestos industry about which my noble friend Lady Hollis was talking—thermal insulation and asbestos removal—but it is a firm, solid, quoted company. Forty thousand people are covered by the scheme. For fairly obvious reasons, a significant proportion of that population used to retire early. Although the problem has diminished, there are still people in the scheme who have to retire early either from industry-related disease or for other reasons.
	It is important to me that everyone is covered, for whatever reason they have to retire early—whether through industrial disease, accident or medical problem, or an accident entirely unrelated to work. A small but significant number of people fall into that category. As I understand it, the FAS regulations at present do not allow anyone under 50 to apply and there is a heavy discount for those who succeed after 50. They should be covered in the same way as other potential beneficiaries from the scheme and the regulations covered by the FAS should be amended to allow for that.
	I recognise that that should not be regarded as a loophole and a way to drive a coach and horses through the regulations, providing for early retirement for large swathes of employees who do not genuinely have those problems. The amendment would leave it to the board of the FAS to decide the criteria, to assess the system of validation and to ensure that the regulations are robust and not open to abuse.
	In principle, the FAS should cover such people. It is a matter of justice that it should be able to do so in terms that it can itself define. That is the purpose of my amendment. I look to my noble friend the Minister at least to indicate that he will consider the implications of what I have said, so that we know before the next stage of the Bill whether there is an amendment that might help or another way in which to extend the protection, such as it is, to those groups of workers. In the mean time, I beg to move.

Lord Skelmersdale: I am somewhat confused by what the noble Lord, Lord Whitty, said. Schedule 7 to the 2004 Act is all about the activities of the Pension Protection Fund; it has nothing to do with the FAS. That said, I have listened carefully to his arguments. I do not think that the amendment, even if it should apply to the FAS, would add measurably to what is currently going on. I understand that both the PPF and the FAS have special procedures in place to speed up claims from terminally ill pensioners. I hope that the Minister will be able to give an edited version of what procedures are available in that regard. If they are satisfactory, as I believe they are, adding more special cases, with all the attendant administration costs and complexities, would do more harm than good.

Lord McKenzie of Luton: I will try to deal with the issue, but the reference made by my noble friend Lord Whitty to the FAS should be to the Pension Protection Fund—that is what is in the legislation on which his amendment focuses. I am therefore in some difficulty in dealing with his specific point.

Lord Whitty: To clarify, my understanding is that this applies in both situations but, as I said at the beginning, the amendment may not be in quite the right place. The amendment certainly relates to the Pension Protection Fund, but there are implications for the FAS as well.

Lord McKenzie of Luton: I am sure that that is right. At the moment, FAS is paid to all at 65, except the terminally ill and survivors, who can receive payments earlier.
	Perhaps I might respond to the specific point that my noble friend made about the Pension Protection Fund. I shall also make a general point about that at the end. I am grateful to him for highlighting this situation. His amendment seeks to allow people to obtain their compensation from the Pension Protection Fund early—I understand that he wants that to cover the FAS, too—without that compensation being actuarially reduced to take account of early payment. I appreciate the difficult choices faced by people who, as a result of ill health, cannot support themselves fully through work and who, if their pension scheme had not suffered an insolvency event, might have been able to retire earlier on a higher pension.
	However, it is important to understand why compensation is actuarially reduced when it is taken early. The basis of the PPF is that, at the point of insolvency, every member of a scheme has a level of compensation to which they are entitled. That level can then be adjusted in various ways to take account of early payment or inflation. This adjustment ensures that members of a scheme receive the same level of compensation overall, whether they take their compensation early or wait until the normal pension age. This ensures fairness. It also ensures that the PPF remains affordable and that members of the PPF can plan for the future. Similar considerations obviously apply to the FAS.
	I appreciate that many pension schemes offer a variety of different options for people who retire early due to ill health. However, the PPF is not a pension scheme, nor is the FAS. The Government deliberately created the PPF as a compensation scheme that would provide a better level of income overall than did schemes that were underfunded when they were wound up. Without the PPF, people who are taken ill or seriously disabled might have no pension at all to look forward to. We have taken care to ensure fairness and to avoid the trap of complexity that would result from creating a PPF that mirrored all the rules of every pension scheme. This means that we have made no special provision for people to receive compensation early specifically on the grounds of ill health. Instead, we have provided for people to apply for early compensation, subject to the adjustment, without having to explain why they wish to receive it.
	If we were to do as the amendment suggests, we would need to provide a mechanism for the PPF to determine when someone was suffering from severe ill health. Such matters are not always easy to determine. The current basis of calculating early compensation ensures certainty about the level of payment and about the affordability of the scheme. Although I have sympathy for those who may find it difficult to continue working until their normal pension age and who wish to take their compensation early without reduction, the amendment would create difficulty. Having heard what my noble friend said, and given that we need to be clear about how the PPF and the FAS work side by side on this, I am happy to take the amendment away and see whether we can help in some way.

Lord Whitty: I am grateful to the Minister for being prepared to have another look at the amendment. I will also look at what impact the situation has had on people. In the mean time, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.
	Clause 19 agreed to.
	Schedule 6 [The Personal Accounts Delivery Authority]:

Baroness Noakes: moved Amendment No. 83:
	Schedule 6, page 58, line 4, at end insert—
	"( ) The number of executive members shall not be more than half the total number of members of the Authority."

Baroness Noakes: I shall also speak to Amendment No. 86. Both amendments seek clarification of the membership of the delivery authority. Amendment No. 83 would add a new sub-paragraph to paragraph 1 of Schedule 6, so that the authority will have a majority of non-executive members. The Minister will be aware that it is the norm in listed companies under the combined code on corporate governance that at least half the board should be non-executive, not counting the chairman. If we include the chairman, who is normally counted as non-executive in government Bills, even though he generally works well beyond non-executive limits, that means that public sector boards have a majority of non-executive members. There are lots of examples from recent legislation, with which I am sure the Minister is familiar.
	The chairman of the delivery authority is not explicitly called a non-executive in this Bill, as he would be in other Bills, but there is a sideways reference to him in paragraph 2(1), which implies that he is non-executive; hence my amendment, which, in line with public and private sector practice, would require that, excluding the chairman, there could not be more executive directors than non-executives. Concerns have been expressed about the delivery authority being independent of government and understanding all the competing interests. It normally falls to the chairman and the non-executives to rise above the detail and to ensure that stakeholder interests are well served, which is why the composition of the authority is of particular importance.
	Amendment No. 86 deals with paragraph 1(4), which says that,
	"the Secretary of State and the Authority must aim to ensure that the Authority",
	has in the range of three to nine members. My amendment simply says that the authority "shall" have that number of members, which is the normal formulation found in other Acts. Why does this Bill have to be different? Since appointing members is not an onerous task, why should there be any excuse for not having three members? Can there ever be an excuse for having more than nine members? I beg to move.

Lord McKenzie of Luton: I thank the noble Baroness, Lady Noakes, for the chance to touch on the size and composition of the delivery authority board. Amendment No. 86 puts strict limits in place for the size of the delivery authority board. The Bill currently provides some flexibility in the size of the authority's board, enabling the membership to go below three or above nine for a short period should this be needed.
	Paragraph 6(2) of Schedule 6 enables the authority board to function without an executive member until the first chief executive is appointed, which will enable the chairman to be involved in the recruitment process for the chief executive. Alternatively, there may be a need for additional expertise to be recruited for a short period, which may temporarily increase the size of the board above nine members. This flexibility is important in enabling the authority to tackle such short-term challenges in an appropriate and effective manner. As such, we would not wish to impose on the board the strict limits that this amendment seeks, but we expect the outcome routinely and normally to be as the noble Baroness would expect.
	Amendment No. 83 looks at the composition of the board. In particular, it seeks to ensure that not more than half the total members of the board are executive members. This rightly alludes to the important role that non-executives play in providing checks and balances on the executive members. I can reassure the Committee that this is a principle that we will adhere to; indeed, our current recruitment plans reflect this. However, this is already covered by the provision in Clause 21 that requires the authority board, in managing its affairs, to have regard to the general guidance for public bodies and the generally accepted principles of good corporate governance. This includes the principles in the Financial Reporting Council's Combined Code, which sets out that executive members should not constitute more than half the membership of the board.
	Including this amendment in legislation is therefore unnecessary and could prove to be disruptive to the work of the authority in the event that there is a short period when a non-executive vacancy is not filled, forcing the proportion of executive members to more than 50 per cent. The provisions in Clause 21 are robust, but at the same time provide flexibility to deal with such circumstances. I hope that that has reassured Members of the Committee. I believe that what the noble Baroness seeks and expects to be the norm will pertain, while there will be flexibility at the margins for practical reasons.

Baroness Noakes: In the circumstances that the Minister has described, I can see that there may occasionally be a need for flexibility. However, it is curious that, in general, Bills are not drafted to provide for that kind of flexibility. One needs to reflect on why a DWP Bill has to have that flexibility. I am grateful to the Minister for putting on record the reasons why it is needed and for saying that the Government expect the principles of balance on the board to be adhered to through appointments. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Baroness Noakes: moved Amendment No. 84:
	Schedule 6, page 58, line 6, at end insert "after consulting the chairman"

Baroness Noakes: I shall speak also to Amendments Nos. 98 to 100. Under the Bill the Secretary of State will appoint the chairman of the Personal Accounts Delivery Authority, which seems reasonable, but he then goes on to make the first appointments of the other executive members, the chief executive and the non-executive members. Amendments Nos. 84, 99 and 100 would make all these appointments subject to consultation with the chairman.
	This delivery authority will not last very long: five years at the most, we hope. There is unlikely to be a real issue of second-time-around appointments, although inevitably some will arise. The whole character of the authority will thus be determined by the first appointments, and there needs to be some kind of brake on the Secretary of State simply filling the boardroom with his cronies.
	Since the chairman of the delivery authority may well be a crony, I accept that my amendment may not achieve much; but if we assume that the Secretary of State appoints a genuinely independent chairman, which is certainly what a number of outside interests earnestly hope, the chairman's views must be sought on the composition of the authority, including the chief executive. As I say, the business community and other interest groups want a genuinely independent authority, starting with the chairman and going on through the other appointments. With that in mind, I suggest that the chairman should be consulted on the appointments.
	Amendment No. 98 deals with the deputy chairman, who may be appointed under Schedule 6(5). Most organisations, especially public sector bodies, operate perfectly well without a formally appointed deputy chairman written into their constitution. I suggest that that is doubly so for those with a limited life, but if the Government really want a power to create a deputy chairman, they can have one. However, paragraph 5(3) provides a power for the Secretary of State or the chairman to issue directions to the deputy chairman. Why is the Secretary of State interfering in the internal way that the delivery authority works? This is another example of the fact that the DWP will be able to exercise some degree of micromanagement of the delivery authority while pretending that it is independent.
	My Amendment No. 98 replaces "chairman or the Secretary of State" with "Authority", but my preference would be for no one to give "directions" to the hapless individual who is the deputy chairman. We all know what a deputy does: he deputises, and he can undertake specific functions as agreed. He does not need directions for that. I beg to move.

Baroness Morgan of Drefelin: I thank the noble Baroness, Lady Noakes, for allowing me this opportunity to provide some detail about our recruitment plans for senior personnel in the delivery authority. Noble Lords will no doubt have seen the recent advertisements for some of these posts in the Sunday newspapers. I should like to reassure the Committee that our intention is for the chairman to be involved in the process as much as possible. The closing date for applications for the post of chairman and the first non-executive director was 8 May, and we hope to announce the successful candidates in the summer. This timetable allows the chairman to input into the recruitment of other board members, in particular the chief executive. We expect to announce the successful candidate for this post later in the year. All appointments will, of course, be subject to the Royal Assent of this Bill.
	We anticipate that there will eventually be nine delivery authority board members: a chairman, four non-executives and four executives, including the chief executive. This is in line with one of the central recommendations of the Higgs report that at least half of the board, excluding the chairman, should be independent non-executives. The intention is to make further appointments to the board later this year and early next.
	Amendment No. 98 concerns the role of the deputy chairman. The Bill allows for the chairman or the Secretary of State to provide directions to the deputy chairman should he be required to discharge some or all of the functions of the chairman. This is in line with good business practice. The chairman may decide to delegate certain functions to his deputy. This does not mean abdicating responsibility but provides the authority with the flexibility to focus efforts and skills in the most effective way possible to achieve its objectives.
	There may well be critical peaks in the work schedule. The authority will need to utilise its resources to best effect. Enabling the chairman to delegate certain functions will help to achieve this. Furthermore, this provision also covers for unforeseen circumstances, which is what I think the noble Baroness was pointing towards. For instance, if the authority were without a chairman due to illness, it would allow the Secretary of State to give some guidance to the deputy chairman who may be covering this crucial role on a temporary basis. It is not intended to be micromanagement. The provisions in the Bill do not compromise the independence of the delivery authority; they are intended to enable continuity of business in the event of the chairman being unable to discharge his duties.
	I hope that noble Lords are reassured by this and agree that these provisions work to best effect as they stand. I therefore hope the noble Baroness will feel able to withdraw the amendment.

Baroness Noakes: I thank the Minister for that reply, although I was not entirely convinced by it. She said that the chairman would be involved in appointments as much as possible; that falls short of a firm commitment that the chairman will be involved. She said that this allows the chairman to have some input; that is not consulting the chairman. I think the noble Baroness was saying that DWP Ministers are in charge of the process and they might let someone into it if they feel like it.

Baroness Morgan of Drefelin: There is a firm commitment to involve the chair in appointments. The timetable has been carefully worked through and there is an absolute intention that the chairman will be involved. Subject, of course, to following the correct guidance for public appointments, independent scrutiny and so on, the chairman will be involved in the appointment of non-executives and the chief executive.

Baroness Noakes: I thank the noble Baroness for that clarification. She said that it was good business practice to give directions to a deputy chairman. I can tell her that it is 100 per cent not good business practice. It is nowhere close to normal, let alone good, business practice. It is extremely unusual that a deputy needs to receive special instructions because the nature of the deputy role is as decided. It could be straightforward deputising—that is, filling in when the chairman is not there—or it could be to undertake specific functions. "Directions" is a very Whitehall-centric view of how appointments to boards should be handled. If any instruction or guidance is to be given, it should come from the authority, which is what my amendment seeks.
	I shall reflect on what the noble Baroness has said and may return to this on Report. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Baroness Turner of Camden: moved Amendment No. 85:
	Schedule 6, page 58, line 6, at end insert—
	"( ) The Secretary of State shall have a duty to ensure that the interests of consumers are represented by a member or members of the Authority."

Baroness Turner of Camden: I shall speak also to Amendments Nos. 85A, 104 and 104A, all of which I support.
	As the Committee will know, the TUC has in general been very supportive of the Bill and particularly welcomes the establishment of the delivery authority as far as the personal account scheme is concerned. However, it would like to ensure that the authority is fully representative of the people to be covered by this section of the Bill: consumers. That is why I have tabled the amendment.
	Not surprisingly, the Consumers' Association feels the same way and believes that there should be consumer representation on the board. It particularly welcomes the statement by the Secretary of State on 27 May 2007 that personal accounts will be a trust-based occupational scheme and a members' panel will be established to ensure that members' views are taken into account. It points out that when the Pensions Bill was debated in the House of Commons, cross-party support was given to the idea that consumers should be placed at the heart, as they put it, of personal accounts. It also draws attention to the Work and Pensions Select Committee report, which concluded that,
	"the consumer voice must be heard from the inside at both Advisory and Executive Delivery Authority stages and we look to the Government to bring forward proposals that will enable this to take place".
	It is concerned to ensure that, despite the assurances given, this provision is made in the Bill; hence, we have tabled these amendments.
	The Consumers' Association also seeks a consumer committee members' panel to be written into the Bill. It thinks such a panel would serve as a crucial sounding board for personal accounts policy decisions, in relation to the impact that decisions will have on the consumer. They think that it will add independent scrutiny and advice, ensure the direct involvement of key representative stakeholders and therefore the consumer voice, and improve the quality of decision-making. I am sure your Lordships are not surprised to hear that from the Consumers' Association; that is what it is in business to do.
	I hope this set of suggestions will receive support from the Front Bench, as we think they are reasonable. My noble friend will no doubt add her views on her own amendments, which I also support.

Baroness Gibson of Market Rasen: There are six amendments in my name on the Marshalled List today. The reason for them is that I was contacted by an organisation called Fair Pensions, with which I have worked in the past. It campaigns for responsible investment, and aims to persuade UK pension funds to adopt effective and responsible investment policies.
	Fair Pensions, which has briefed me for today's debate, believes that these amendments would improve the Bill and ensure that the Personal Accounts Delivery Authority abided by best practice on shareholder activism and so promoted acceptable standards of corporate social responsibility on the part of investee companies. Such best practice would have significant benefits for companies, in that it would provide investments against medium-term and long-term risks associated with environmental, social and governance issues.
	The amendments would also ensure that the interests of members—the beneficiaries—of the personal accounts scheme would be formally represented within the delivery authority. Shareholder activism to promote corporate social responsibility does not dictate investment strategy; rather, it requires fund managers to develop a toolkit for identifying, assessing and acting upon issues that may adversely affect returns. It also encourages fund managers to recognise that they are investing pensions and pensions-related assets, and therefore need to analyse medium-term and long-term trends as well as short-term ones.
	Fund managers who have adopted responsible investment practices have worked to future-proof the profits of their investee companies. One example is the Carbon Disclosure Project, of which the Universities Superannuation Scheme pension fund, which I understand is the second largest occupational pension scheme in the UK, is a founding member. The project now has 72 per cent of the 500 largest publicly owned companies reporting on carbon emissions.
	If the delivery authority does not include members with responsibility to represent the interests of the intended beneficiaries of personal accounts, beneficiaries may not be confident that the authority will take their best interests into account. For example, if a committee consists primarily of individuals with finance backgrounds, it could be thought to lack the willingness and ability to evolve in a constantly changing legal and regulatory environment. If the delivery authority does not include members able to represent the interests of beneficiaries, it could consist entirely of persons with finance backgrounds who would oversee other persons with finance backgrounds with no window to the outside world and no communication with those whom personal accounts are designed to benefit.
	The rationale for Amendments Nos. 85A and 104A is that stating that at least one-third of the members of the committee are to be representatives of scheme members brings this scheme into line with the situation that applies in occupational pension schemes, where at least one-third of trustees must be member-nominated. While at this stage it is not possible for such persons to be members of the scheme, because it is not yet operational, it is still desirable for their interests to be strongly represented, as is the case for occupational pension scheme members. Under these circumstances, I hope that the Minister will look at these amendments favourably.

Baroness Noakes: Amendments Nos. 87 and 104, which are in this group, are tabled in my name. The amendment tabled by the noble Baroness, Lady Turner, requires one of the members of the authority to be a person representing the interests of members, but we cannot support it or Amendment No. 85, which was tabled by the noble Baroness, Lady Gibson, for three reasons. First, we do not believe that anybody who sits on an authority should represent a particular interest. That does not lead to good governance, as all members should be focused impartially on the functions of the authority. Secondly, the amendment focuses on one group called "consumers". I find that a very vague term, although the Consumers' Association doubtless finds it easy to deal with. I think that what is meant is more specific: those who are, or may well be, members of the scheme. Thirdly, the amendment focuses on only one possible interest group, and we know that there are other groups, not least those that provide pensions and believe that their voices should be represented in the authority.
	That is why my Amendment No. 87 requires the Secretary of State merely to have regard to the desirability of a balance of interests on the board, with nobody being there as a representative. The amendment refers to those with knowledge and experience of members' needs, employers' involvement, pension providers and regulatory issues around pensions, and I have no doubt that others could be added to that list. My amendment does not require the Secretary of State to make specific appointments from any of those groups. In fact, that would be impractical, as the membership of the very small board that we discussed on previous amendments would not, except occasionally, go above nine members. My amendment does not preclude the Secretary of State taking into account other factors that are normally brought into play when designing a board, the most common nowadays being the diversity agenda.
	Amendment No. 104 adds a specific committee to represent the interests of scheme members and prospective scheme members. It is similar to Amendment No. 104A, which was tabled by the noble Baroness, Lady Gibson, but her amendment is more elaborate and potentially more constraining.
	My amendments meet the concerns of the noble Baroness, Lady Turner, but in another way. As she said, it is clearly important that the design of the personal accounts system should have the interests of those who should benefit from it at its heart—I think the noble Baroness used that term—but not necessarily on the authority itself. The noble Baroness, Lady Turner, referred to the announcement last month that there would be a members' panel for the personal accounts scheme. An equivalent panel exists for the Financial Services Authority, and it is a perfectly normal mechanism to set up. We shall certainly be looking carefully at the next Bill to see that one is set up when the scheme is set up, but the issue now is the Personal Accounts Delivery Authority, and it is important that there should be a panel that represent the views of those who will become members of the scheme. We believe that that should be in the Bill. There may not be much in practice between me and the noble Baronesses opposite, but we come about these things in a slightly different way.

Lord Leitch: I declare my interest as a director of Scottish Widows, chairman of BUPA and Intrinsic Financial Services, as well as other entries in the register. I have spent all my working life in the financial services industry and have the scars to prove it. For the past two years I have led the Leitch review of the UK's long-term skills needs. At the same time, I have been carefully following the Government's policy on pensions.
	I endorse both the sentiment and the substance behind the amendments in the names of my noble friends Lady Turner and Lady Gibson. The noble Baroness, Lady Noakes, makes very helpful points.
	The Personal Accounts Delivery Authority has a vital role to play in delivering both the ambition and the implementation of the Government's pension strategy. The stark reality is that the UK is witnessing steady deterioration and erosion of the number of people on track to live a secure and comfortable retirement. We are a nation divided by our propensity and our ability to save. Too many consumers either simply have no idea about the levels of saving required for a comfortable retirement or they live in disturbing ignorance of the financial reality for even a very modest retirement.
	The new authority has a key role to play, both in increasing public awareness and education on saving for retirement and in facilitating the delivery of the right advice at the right time. In this regard, it is essential that the authority really understands and takes note of all consumer interest.
	There is, of course, another major impediment to a secure retirement and it is, in many ways, for many people, the greatest obstacle. That is affordability. Disturbingly, the obstacle of affordability is concentrated among those with the greatest need to save. Solutions to address and remedy this obvious but serious problem lie elsewhere through initiatives on skills, employment and social justice. But that is for another day.
	To the issues before us, I see two clear challenges to address. First, we must influence and encourage those who can or do save to do more and to make the right level of provision. Secondly, we must support those who are unable to do so. No pensioner in our country should ever live in poverty.
	Personal accounts have a fundamental role to play in addressing the first challenge, which is increasing the numbers of people saving and the absolute amounts being saved. But personal accounts will stand—or fall—on their ability to broaden and deepen the extent of retirement savings. In other words, they must reach the parts that existing provision does not reach. They must work in tandem with the private sector. Public and private schemes must complement each other. Personal accounts must be genuinely additive; they must not simply redirect savings from other channels. That would be a wasted opportunity and an expensive, pointless exercise.
	At the same time, it would be damaging if employers used personal accounts as an excuse to reduce their overall contribution levels. In recent years, there has been a significant shift away from defined benefit schemes to defined contribution arrangements, in many cases resulting in a decrease in employer contributions. This inexorable decline must not prevail.
	However, do not misunderstand me. Despite what one may read, today the private pensions sector is both tightly regulated and flourishing. Millions of people are making substantial contributions to their pensions. Personal accounts must not just coexist with existing private provision. The two must work harmoniously in tandem as part of an overall pensions strategy—neither should benefit, nor suffer, at the hands of the other.
	I understand the argument that the taxpayer should help to fund the establishment costs of the delivery authority, but at the same time existing providers should not be unfairly disadvantaged by significant or open-ended public subsidy. Like their private sector counterparts, the success of personal accounts will be determined in large part by the quality and relevance of the advice that individuals receive. Make no mistake, advice in what remains one of the most complicated pension systems anywhere in the world will make the difference between success and failure. The Government's intention to make a generic advice model is needed and, I believe, very welcome. I look forward to the conclusions of the Thoresen review, but I want to sound a note of caution. Generic advice to consumers is by its very nature limited in its application to specific circumstances. The challenge is to be both general yet sufficiently personalised to encourage saving and inform the correct decision. Striking the right balance will be incredibly difficult. We must be alert to the real risks in both the short and long term.
	I am sure that we all agree that retirement should be a secure period in everyone's life, not something to dread or feel anguish about. For many people that peace of mind demands a much greater awareness and a willingness to make adequate preparation for the future. For many, that will mean confronting the very harsh reality of making sacrifices today for a more secure and certain tomorrow. This Bill, with effective personal accounts, is a solid foundation on which to build that tomorrow.

Lord McKenzie of Luton: I thank my noble friends who moved and spoke to the amendment and my noble friend Lord Leitch for giving his broad sweep of the personal accounts landscape. He brings an experienced and knowledgeable eye to the risks and opportunities that personal accounts represent.
	The amendments before us focus on membership of the delivery authority and, in particular, the arrangements for consumer representation. These are both important issues. The board will be the driving force of the organisation, providing the strategic leadership as it discharges its functions, so it is vital that the right people are appointed. Consumer representation is an issue which we rightly recognise as crucial to the success of the personal accounts scheme.
	I shall talk first about the membership of the authority board. I can assure noble Lords that we recognise the importance of ensuring the board contains individuals with a breadth of knowledge and experience, from a range of different backgrounds. The Secretary of State will of course be mindful of this when making or approving appointments. Noble Lords should be reassured by this, as it is likely that the delivery authority will contain members with the knowledge and experience outlined in Amendment No. 87. However, we might also wish to have members from other backgrounds and with other experience, so we do not want to specify in legislation the particular skills or experience members must have and thereby restrict the flexibility to recruit the right person at the right time.
	The specific calls from my noble friends Lady Turner and Lady Gibson for board-level representation of consumer interests also highlight an important issue. As the White Paper makes clear, we consider it essential to the success of the scheme that members' needs are at the core of personal accounts. I can reassure the Committee that each board member will be acting in the interests of prospective members, although each member will, of course, bring different knowledge, skills and backgrounds to their role. We want the authority to have the flexibility to recruit the best person for the job. The noble Baroness, Lady Noakes, also effectively aired the point about the board members' representing the whole board rather than sectional interests.
	Amendments Nos. 104 and 104A seek to oblige the delivery authority to establish a committee for the purpose of representing the interests of prospective scheme members. As I made clear, we consider it essential that members' needs are at the core of personal accounts. However, at this initial stage, it is the Government who will continue to take policy decisions and set the framework within which the delivery authority must work. It is therefore more appropriate for prospective members' comments or concerns on personal accounts policy to be directed at this stage to the Department for Work and Pensions. I can reassure noble Lords that officials within the department have regular engagement with a range of stakeholders, and maintain productive and valuable relationships with groups that represent the issues of prospective members. If my noble friends have other contacts, we would certainly be more than happy to engage with them as part of that process.
	We recently had a very productive and interesting meeting with Which? and agree with it that consumer representation is fundamental if trust and confidence in personal accounts is to be upheld. I can also reassure the Committee that we are exploring the arrangements for member representation in the live running of the scheme. However, as I outlined, during this advisory stage it is more appropriate for stakeholders' views to be directed to the DWP. It will be for the delivery authority to establish committees and to invite persons from outside the authority to sit on them as it deems appropriate. The delivery authority may wish to set up a committee to advise it on the interests of prospective members. Indeed, that is made possible by paragraph 9(1)(b). Again, however, we would not wish to specify in legislation specific committees to be established by the delivery authority. This would remove the delivery authority's flexibility to use committees in the most effective way.
	Although I am not able to accept the amendments in the form in which they have been tabled, I hope that what I have said has been reassuring to the noble Baroness and that she will be able to withdraw the amendment.

Baroness Noakes: Before the noble Baroness decides what to do with her amendment, I should point out that the Minister has used the word "flexibility", which is one of those concepts that is regularly trotted out by Ministers when they do not wish to accept an amendment. The board wants to keep flexibility to use committees as it wants. That means that it has the flexibility not to involve consumer interests. The whole purpose of these amendments, regardless of whether we call it "consumer interests" or "the needs of members", is to ensure that the board has at heart those needs of the members.
	I completely understand that the DWP may want to continue consulting those interests and other stakeholders. But the important point is that the delivery authority will be doing very important work in advising the Secretary of State on his proposals and advising on the implementation of those proposals. It is crucial that the needs of members are specifically built into—hardwired into—the way in which the authority works. There should not be any flexibility about not having an involvement with consumers or members. I think that the Minister needs to reconsider this.

Lord McKenzie of Luton: I was seeking to make the point, perhaps not effectively enough, that at this stage the policy formation is still with the DWP. Clearly, advice will be coming forward from the delivery authority. I cannot conceive that the matter would go forward without consumer interests being taken fully into account. I suppose that the particular assurance that noble Lords will have is that we have a second Bill that will follow this one in which much of the detail of personal accounts will be presented. That is another protection. I would hang on to the point that this policy development, and how it will affect consumers and prospective members, still sits with the DWP. That is where the engagement at this stage is best focused.

Baroness Turner of Camden: I thank noble Lords who participated in this debate, which I found extremely interesting, particularly the contribution of the noble Lord, Lord Leitch, who talked about the difficulties involved in persuading people to save. We have often discussed this in various committees with which I am associated. It is very difficult. We are asking people to save at a period in their lives when they are under considerable pressure: they are having to pay for a mortgage; very often, in mid-life, they are having to support children; they may even have to support elderly relatives, and so on. There is a lot of pressure on incomes. That is one of the reasons why the TUC supported personal accounts and automatic payment unless people opt out. It is a way of ensuring that people pay something. It is very important that that should be acknowledged. We should thank the Government for thinking of it. I entirely support the scheme.
	As regards representation on the delivery authority, I share the view expressed by the noble Baroness, Lady Noakes. I thank her for her intervention. Clearly, we do not want too much flexibility. We want to be sure that our legitimate interests will be recognised by the Government. We accept that at this point in time the measure is not particularly appropriate. Other legislation will be introduced. We are not wedded to our wording. We simply wanted to get a discussion on the issue and to ensure that the Government were committed to our view that consumer interests had to be at the core of this scheme. The government Front Bench assured us that that was the case, for which I am grateful. We were told that consumer interests were regarded as vital vis-à-vis the delivery authority.
	We shall watch the situation very carefully to see how it develops. In the mean time, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.
	[Amendments Nos. 85A to 87 not moved.]

Baroness Noakes: moved Amendment No. 88:
	Schedule 6, page 58, line 12, leave out "non-executive"

Baroness Noakes: I shall speak also to Amendments Nos. 90, 92 and 93. Under the Bill a person may not be appointed a chairman or a non-executive if he has a conflict of interest, but there is no such provision in respect of executive directors. Since all the directors will be members of the authority, I cannot understand why the non-executives are singled out as having conflicts of interest, which are defined in paragraph 2(6) of Schedule 6 as something which is,
	"likely to affect prejudicially the discharge by him of his functions as a member of the Authority".
	It seems to me that a conflict of interest in those terms is so fundamental an issue that it should apply to all directors. My amendments in this group seek to delete the qualification "non-executive" against member, where it appears in paragraph 2 of Schedule 6, in order to make the rule apply to all members. I beg to move.

Lord Oakeshott of Seagrove Bay: I accept what the noble Baroness, Lady Noakes, says. A conflict of interest is a conflict of interest whether it applies to an executive or non-executive director, and it should be equally reported and noted.

Baroness Gibson of Market Rasen: I have two amendments in this group, Amendments Nos. 93A and 104B. They are short and speak for themselves. Given the time of night, I shall say no more.

Baroness Morgan of Drefelin: I thank the noble Baroness, Lady Noakes, and the noble Lord, Lord Skelmersdale, for providing this opportunity to discuss the extent to which the Secretary of State should consider conflicts of interest when determining the suitability of individuals to serve as executive members of the authority. As drafted, the Bill requires the Secretary of State to satisfy himself about the independence of the chairman and other non-executive members of the delivery authority. These amendments would extend that requirement to include executive members. Executive members will, of course, be public sector employees of the authority. As such, they will be subject to the usual rules on proper conduct that apply to all public sector employees.
	In addition, Schedule 6 requires an executive member to declare any conflict of interest at meetings of the authority or any of its committees or subcommittees. Such a declaration is required to be minuted. We believe that these requirements are sufficient to provide the effective and necessary safeguards that these amendments seek to achieve.
	The position of the chairman and non-executive members is different. They will not be employees of the delivery authority and therefore, unlike the executives, will not be public sector employees. They may hold other directorships that would be considered to prejudicially affect their actions as members of the authority. Clearly, that needs to be considered by the Secretary of State when making such appointments. Schedule 6 has been carefully drafted to take account of that distinction. I can assure noble Lords that in recruiting both executive and non-executive members we will follow all appropriate guidance, ensuring that all appointments are properly considered and scrutinised.
	I turn now to the important issues raised by my noble friend Lady Gibson. Amendments Nos. 93A and 104B seek to ensure that being a member of a scheme is not taken to be a conflict of interest for the purposes of the disqualification provisions. Member representation will be crucial to the success of the pension scheme. My honourable friend the Secretary of State made clear our intention to create a members' panel. Our response to the White Paper consultation, to be published shortly, will set out further details. The delivery authority established in this Bill will be charged with providing advice to the Secretary of State on the practical and commercial implications of various options that may be considered for personal accounts. At this stage, there will be no scheme members, as the delivery authority is not charged with running the scheme. These amendments do not have the practical effect that my noble friend perhaps intended, although I appreciate the importance of this debate.
	We are in agreement with my noble friend on the purpose and necessity of taking into account the interests of scheme members, but we do not think it appropriate to include them in the Bill. Given that reassurance, I urge the noble Baroness, Lady Noakes, the noble Lord, Lord Skelmersdale, and my noble friend Lady Gibson not to press the amendments in this group.

Baroness Noakes: I am disappointed with what the noble Baroness said, because we are creating a world in which the law says things about non-executive members but a code applies to executive members. The law is clear: the Secretary of State has obligations not to appoint and to keep the matter under review. The noble Baroness's response that executive members are public sector employees and are therefore subject to codes of conduct does not meet the point in any sense. We will move on to the definition of a conflict of interest in the next group of amendments. It is a significant provision—certainly as described in another place—and goes beyond proper conduct. It attacks an issue that is probably more about perception of conflict than conflict itself.
	I would like the noble Baroness and the Minister to reflect on whether it is proper to have that apartheid built into the Act and to assume that everything that is dealt with in paragraph 2 of Schedule 6 is reflected in the codes. The codes are not put in the same terms and will not deliver the same results. In particular, the Secretary of State does not have the same responsibility, and I am not sure that we have the right approach. Any member of the authority should be subject to the same standards as are applied in public life. It would not be right for those standards to be separated.
	We are approaching the witching hour and it is not the right time for me to continue, but I invite the Ministers to look at this matter more carefully before we return to it on Report.

Baroness Morgan of Drefelin: It is essential that we get right the perceptions and conflicts of interest. There should be high levels of confidence in how these are agreed and set out. If it would help, we will think about this and perhaps discuss it before Report.

Baroness Noakes: I thank the Minister for that. If we do not discuss it before Report we will probably do so on Report. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Baroness Morgan of Drefelin: I beg to move that the House do now resume.

Moved accordingly, and, on Question, Motion agreed to.
	House resumed.

Corporate Manslaughter and Corporate Homicide Bill

The Bill was returned from the Commons with their disagreement to certain Lords amendments insisted on and with a Commons amendment to which the Lords have disagreed not insisted on but with amendments proposed in lieu thereof. The amendments and reasons were ordered to be printed.
	House adjourned at 10 pm.